Use of the Marginal Cost of Capital

question 35

Multiple Choice

Use of the marginal cost of capital:

• A) acknowledges that when retained earnings is used up as a source of equity the cost of capital lowers as new common stock is sold to support more growth.
• B) recognizes that the return from the last dollar of funds generated should be less than the cost of the last dollar of funds raised.
• C) acknowledges that when retained earnings is used up as a source of equity the cost of capital rises as new common stock is sold to support more growth.
• D) recognizes that the return from the last dollar of funds generated should be more than the cost of the last dollar of funds raised.

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Definitions:

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