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:

Commerce Bank

A financial institution providing banking services, such as deposits, loans, and other financial products to individuals and businesses.

Assignee

An individual or entity to whom rights or interests are transferred by another, known as the assignor.

Notice

Formal communication or announcement necessarily made to inform a party of certain legal processes or actions.

Assigned Benefits

The transfer of the right to receive benefits from a policy or agreement, such as insurance, from the original beneficiary to another party.