When determining the costs of each component of a firm's capital structure, the firm must evaluate the:
A)marginal cost of new funds
B)total cost of new funds
C)average cost of new funds
D)average cost of old and new funds

Question

Quizplus · Accepted Answer

The marginal cost of new funds is the correct answer because it represents the cost of obtaining an additional dollar of new financing. This is crucial for a firm when determining the costs of each component of its capital structure, as it reflects the current cost of financing, which can impact investment and financing decisions.

When Determining the Costs of Each Component of a Firm's