The added costs associated with obtaining equity capital are based on investor expected rates of return and are explicit costs which affect AFN.

Question

Quizplus · Accepted Answer

The added costs associated with obtaining equity capital are implicit costs related to the expected rates of return by investors, not explicit costs. These costs affect the Additional Funds Needed (AFN) indirectly through the cost of new equity, rather than being direct, out-of-pocket expenses.

The Added Costs Associated with Obtaining Equity Capital Are Based