For a firm confronted with a fixed schedule of possible new investments, any policy that lowers the firm's cost of capital will increase the profitable capital expenditures the firm takes on and increase the wealth of the firm's shareholders. One such policy is
A)internationalizing the firm's capital budgeting opportunities.
B)internationalizing the firm's cost of capital.
C)investing in riskier projects financed with debt.
D)none of the above

Question

Quizplus · Accepted Answer

Internationalizing the firm's cost of capital can lower the cost of capital by accessing capital from international markets. This can increase the firm's profitable capital expenditures and therefore increase the wealth of the firm's shareholders. Option A is also a possibility, however it is not a policy that specifically lowers the cost of capital. Option C is not a recommended policy as investing in riskier projects financed with debt can actually increase the cost of capital and lead to financial distress. Option D is not a valid answer as there is at least one correct answer.

For a Firm Confronted with a Fixed Schedule of Possible