A firm has determined its cost of each source of capital and optimal capital structure, which is composed of the following sources and target market value proportions: If the firm were to shift toward a more leveraged capital structure (i.e., a greater percentage of debt in the capital structure), the weighted average cost of capital would
A) increase.
B) remain unchanged.
C) decrease.
D) not be able to be determined.

Question

A firm has determined its cost of each source of capital and optimal capital structure, which is composed of the following sources and target market value proportions:  If the firm were to shift toward a more leveraged capital structure (i.e., a greater percentage of debt in the capital structure), the weighted average cost of capital would
A) increase. 
B) remain unchanged. 
C) decrease. 
D) not be able to be determined.

Quizplus · Accepted Answer

The Answer of A firm has determined its cost of each source of capital and optimal capital structure, which is composed of the following sources and target market value proportions:  If the firm were to shift toward a more leveraged capital structure (i.e., a greater percentage of debt in the capital structure), the weighted average cost of capital would
A) increase. 
B) remain unchanged. 
C) decrease. 
D) not be able to be determined.

A Firm Has Determined Its Cost of Each Source of Capital