Which of the following statements is/are true about the marginal cost of capital?
A)It is the weighted average cost of the next dollar of financing raised.
B)For most levels of financing, it equals the weighted average cost of capital.
C)It exceeds the weighted average cost of capital due to flotation costs.
D)All of the above are true.

Question

Quizplus · Accepted Answer

All the statements about the marginal cost of capital are true. It represents the weighted average cost of the next dollar of financing (A), typically equals the weighted average cost of capital for most levels of financing but can exceed it due to flotation costs associated with raising new capital (B and C).

Which of the Following Statements Is/are True About the Marginal