Use of the Marginal Cost of Capital

question 97

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 rises as new common stock is sold to support more growth.
• B) recognizes that the return from the last dollar of funds generated should be equal to the cost of the last dollar of funds raised.
• C) both a and b are correct.
• D) none of these are correct.

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Definitions:

Well-Known

Being widely recognized or familiar to many people.

Desired State

The preferred or targeted condition or status that an individual, group, or organization aims to achieve.

Standardized Way

A method or procedure that has been uniformly applied and adopted across different situations or environments to ensure consistency.

Existing State

The current condition or situation of a system, organization, or individual before any changes or interventions.