The cost of capital for a start-up company:
A)is lower for a start-up company since it is untested.
B)depends only on the market rate of interest.
C)depends only on the state of the economy.
D)is higher for a start-up company because it is more risky than an established company.

Question

Quizplus · Accepted Answer

The cost of capital for a start-up company is typically higher because it is more risky than an established company. Investors will often require a higher rate of return to compensate for the higher risk involved in investing in a start-up. The cost of capital for a start-up will depend on a variety of factors, including the quality of the idea, the experience of the management team, the potential market size, and the competitive landscape.

The Cost of Capital for a Start-Up Company