Larger amounts of financing affect cost of capital mostly for all of the following reasons EXCEPT
A. increase in the flotation costs
B. increase in the stock price
C. increase in the risk borne by the investors
D. increase in the investor’s required rate of return
Which of the following statements is TRUE?
A. The cost of new common stock issue is generally less than the cost of retained earnings.
B. An investment with reasonably higher risk will require a relatively higher cost of capital than an investment of lower risk.
C. A firm’s cost of capital is the rate of return earned on the most profitable investment opportunity available.
D. In determining the cost of financing, management must ignore the needs of the creditors and owners of the firm.