Which of the following is an accepted financing wisdom?
A) The maturity of funds used to support a project should roughly match the project's duration.
B) Because firms can use their own equity as they choose, equity can be used to finance projects of any duration.
C) Any project can appropriately be supported by funding with a shorter maturity.
D) Any project can appropriately be supported by funding with a longer maturity.

Question

Quizplus · Accepted Answer

The accepted financing wisdom is that the maturity of funds used to support a project should roughly match the project's duration. This is because using funds with a different maturity could lead to potential problems such as refinancing risks, interest rate risks, and cash flow mismatches. Therefore, it is best to match the maturity of funding with the project's duration to ensure smooth cash flows and minimize potential risks. Choices B, C, and D are incorrect because they go against this accepted wisdom.

Which of the Following Is an Accepted Financing Wisdom