For Most Firms, the Cost of Capital Decreases to a Low

question 57

Multiple Choice

For most firms, the cost of capital decreases to a low point as the firm ________ debt financing. At some point beyond this optimal level, the cost of capital increases as the amount of debt ________.

• A) decreases; increases
• B) decreases; decreases
• C) increases; increases
• D) increases; decreases

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Definitions:

Escalation Of Commitment

A decision-making error in which individuals or groups continue to invest in a failing course of action based on the time, money, or resources they have already committed.

Systematic Way

An organized, methodical approach to procedures or activities, often characterized by order and planning.

Positive Mood

A psychological state characterized by feelings of joy, satisfaction, and increased energy.

Decision Making

The act of making choices by identifying a decision, gathering information, and assessing alternative resolutions.