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Examveda

According to traditional approach, the average cost of capital _______________.

A. Remains constant up to a degree of leverage and rises sharply thereafter with every increase in leverage

B. Rises constantly with increase in leverage

C. Decrease up to certain point, remains unchanged for moderate increase in leverage and rises beyond a certain point

D. Decrease at an increasing rate with increase in leverage

Answer: Option C

Solution(By Examveda Team)

According to traditional approach, the average cost of capital decrease up to certain point, remains unchanged for moderate increase in leverage and rises beyond a certain point.

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C. employment of funds on assets to earn returns

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