Q496
In large expansion programs, increased riskiness and floatation cost associated with project can cause
A.
rise in marginal cost of capital
AnswerB.
fall in marginal cost of capital
C.
rise in transaction cost of capital
D.
None of the above
Answer: Option A
Solution
Answer: Option A
Solution:
In large expansion programs, increased riskiness and floatation cost associated with project can cause rise in marginal cost of capital. Marginal cost of capital is the weighted average cost of the last dollar of new capital raised by a company. It is the composite rate of return required by shareholders and debt-holders for financing new investments of the company.