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AVATAR III Page 4 Corporate Finance Question:
Which of the following statments about the cost of capital is false ?
a. If the firm needs more funding than can be supported by Retaining Earnings the firm's WACC will increase;
b. As the firm raises more and more capital, market efficiency would indicate that the firm's marginal weighted average cost of capital shoud fall
c. Assuming constant risk, the firm's margical weighted average cost of capital is the correct discount rate to use in making capital budgeting decisions.
I think B should be wrong since the MCC is increasing per Curriculum 4 page 46.
Statement C is correct since the assumption is "constant risk" |
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