Q74
According to traditional approach, the average cost of capital _______________.
A.
Remains constant up to a degree of leverage and rises sharply thereafter with every increase in leverage
B.
Rises constantly with increase in leverage
C.
Decrease up to certain point, remains unchanged for moderate increase in leverage and rises beyond a certain point
AnswerD.
Decrease at an increasing rate with increase in leverage
Answer: Option C
Solution
Answer: Option C
Solution:
According to traditional approach, the average cost of capital decrease up to certain point, remains unchanged for moderate increase in leverage and rises beyond a certain point.