Typically, According to the Text, the MCC Schedule Is Either

question 10

Multiple Choice

Typically, according to the text, the MCC schedule is either horizontal or rising, which implies that the cost of capital to a firm increases as it raises larger and larger amounts of capital.The rising section of MCC schedule

• A)Is caused by economies of scale in financing.
• B)Would be eliminated (that is, the MCC schedule would be horizontal) if the firm retained all of its earnings.
• C)Results from a change in the debt ratio as the firm expands.
• D)Occurs because the firm must, if it is to expand, be willing to take on riskier and riskier projects, and this causes an increase in the cost of capital.
• E)Results from flotation costs associated with the sale of new common and preferred stock, along with higher debt costs, as the firm's rate of expansion increases.

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Definitions:

Derived Demand

The demand for a factor of production or intermediate good that occurs as a result of the demand for another good or service.

Marginal Productivity

The additional output that results from using one more unit of a particular input, holding all other inputs constant.

Resource Price

The cost associated with acquiring resources or inputs needed for production, such as raw materials, labor, and capital.

Anaconda Smelting Company

A historical company involved in the process of melting and refining metal ore to separate it from its impurities.