Question

As the volume of financing increases, the costs of the various types of financing will ________, ________ the firm's weighted average cost of capital.

a. increase, lowering
b. increase, raising
c. decrease, lowering
d. decrease, raising

Answer 1

As the volume of financing increases, the costs of the various types of financing will increase, raising the firms weighted average cost capital. This happens because the firm will have to pay more in fees for their financing an that will be passed on to the firms weighted average cost capital.