If a firm were simply concerned with minimizing costs of incremental financing,then the straightforward choice would be:
A)debt.
B)new equity.
C)retained earnings.
D)half debt and half equity financing.

Question

Quizplus · Accepted Answer

Debt financing typically has lower costs of capital compared to equity financing. This is because debt is seen as less risky to investors as it is usually secured by collateral and has a fixed rate of return, which reduces the cost of financing for the firm. Therefore, if a firm is concerned solely with minimizing costs of incremental financing, it should opt for debt financing.

If a Firm Were Simply Concerned with Minimizing Costs of Incremental