Poor capital structure decisions can result in a high cost of capital, thereby making some unacceptable investments acceptable.

Question

Quizplus · Accepted Answer

Poor capital structure decisions can lead to a higher cost of capital, which can make even otherwise acceptable investments unattractive. This is because a high cost of capital can increase the financial risk associated with a project and reduce its potential returns, making it less desirable to investors. Therefore, companies should strive to maintain an optimal capital structure that balances debt and equity to minimize the cost of capital and maximize shareholder value.

Poor Capital Structure Decisions Can Result in a High Cost