The marginal cost of capital _____ as more capital is raised during a given period.

Question

Quizplus · Accepted Answer

As more capital is raised during a given period, the marginal cost of capital is likely to increase. This is because as a company raises more capital, there may be diminishing returns to additional funding sources, and lenders may require higher interest rates or other costs to compensate for increased risk. Additionally, as the company becomes more heavily leveraged, it may become riskier for investors, driving up the cost of equity.

The Marginal Cost of Capital _____ as More Capital Is