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

Question

Quizplus · Accepted Answer

The marginal cost of capital generally increases as more capital is raised during a given period. This is because as a company raises more capital, it becomes riskier to lend to, which increases the cost of borrowing. Additionally, as the company becomes bigger, new investment opportunities may not be as profitable as previous ones, leading to a higher cost of capital.

The Marginal Cost of Capital Generally _____ as More Capital