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:

Phobias

Intense, irrational fears of specific objects, activities, or situations that lead to avoidance behavior.

Extinguished

In psychology, extinguished refers to the process by which a previously learned behavior diminishes or disappears as a result of non-reinforcement.

Genetic Predisposition

The increased likelihood of developing certain traits or diseases based on one's genetic makeup.

Phobias

Intense, irrational fears of specific objects or situations that pose little to no actual danger.