When a company undertakes large expansion programs, it often faces higher risk and greater flotation costs (costs of issuing new securities). As the company raises more capital, it may need to offer higher returns to attract investors. This leads to... Read More
When a company undertakes large expansion programs, it often faces higher risk and greater flotation costs (costs of issuing new securities). As the company raises more capital, it may need to offer higher returns to attract investors. This leads to an increase in the marginal cost of capital, which is the cost of raising one additional unit of capital.
Discussion
Leave a Comment