Poor capital structure decisions can result in ________ the cost of capital, resulting in ________ acceptable investments.
A) increasing; fewer
B) decreasing; more
C) increasing; more
D) decreasing; fewer

Question

Quizplus · Accepted Answer

Poor capital structure decisions can lead to higher cost of capital, which makes it more expensive for the company to borrow money or issue stocks. Higher cost of capital reduces the number of acceptable investments as the company may not be able to generate enough return to justify the cost of financing. Therefore, choice A - increasing the cost of capital and resulting in fewer acceptable investments is the best answer.

Poor Capital Structure Decisions Can Result in ________ the Cost