Marginal cost of capital?

a. recognizes that cost of capital does not staty constant as more funds are raised
b. usually provides the same capital budgeting choices as the use of weighted average cost of capital
c. can be defined as the cost of capital when no retained earnings are available for expansion
d. none of the above

A.

As a company leverages up (increases its debt load), the cost of the next round of debt or equity will be higher due to the increased risk inherent in the company.

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