In a traditional approach, which of the following statement is true in the context of the average cost of capital?

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

B. It rises constantly with an increase in leverage

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

D. It decreases at an increasing rate with an increase in leverage

Answer: Option C