When a company tries to maintain an optimal capital budget, it faces challenges like rising marginal cost of capital and capital rationing. The marginal cost of capital increases because additional funds often require higher returns to attract investors. Capital rationing... Read More
When a company tries to maintain an optimal capital budget, it faces challenges like rising marginal cost of capital and capital rationing. The marginal cost of capital increases because additional funds often require higher returns to attract investors. Capital rationing occurs because firms have limited resources and must select the most profitable projects under budget constraints.
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