0
interest rate and risk are the only two factors involved in your question. if money is tight, then people are gonna charge you more to use it-hence increase in interest. also if the economy is red-hot the federal reserve steps in and says, "lets raise interest rates and everyone will stop doing so much business because interest is higher". if your business venture or loan is "risky" then a company is going to charge you a higer rate of return on their money- hence you pay more for the money.
Still curious? Ask our experts.
Chat with our AI personalities
Fran
Blake
ReneAdd your answer:
Earn +20 pts
What is the concept of marginal cost of capital?
The marginal cost of capital (MCC) is the cost of the last dollar of capital raised, essentially the cost of another unit of capital raised. As more capital is raised, the marginal cost of capital rises.
What should a monopoly do if marginal revenue exceeds marginal cost?
increase output
What should the firm do if marginal revenue is greater than marginal cost?
If a firm's marginal revenue is greater than its marginal cost, it should increase production to maximize profits.
Why is the marginal cost of capital more relevant to making investment decisions than the historic cost of capital?
because of deprecation
How does an increase in wages affect a firms marginal cost curve?
Bbg
Why does causes cost of capital increase?
element of risk is the factor which causes the cost of capital to increase as much the risk as much the cost of capital.
What is the concept of marginal cost of capital?
The marginal cost of capital (MCC) is the cost of the last dollar of capital raised, essentially the cost of another unit of capital raised. As more capital is raised, the marginal cost of capital rises.
How do you compute the Marginal Cost of Capital schedule?
Marginal or incremental cost of capital is cost of the additional capital raised in a given period
When a firm's marginal revenues are higher than its marginal cost?
Marginal cost is
How does marginal revenue and marginal utility relate to capital?
Marginal revenue/margina utility return from capital represents the benefit of capital. When determining the optimal amount of capital, we must take into account the point when marginal benefit = marginal cost. This optimises profit/utility.
What are the disadvantages of share capital?
Disadvantage of share capital is that it increases the risk of default which causes the increase in cost of capital.
How do you compute marginal cost of capital?
Take the first-order derivative of the cost of capital function.
What should a monopoly do if marginal revenue exceeds marginal cost?
increase output
What should the firm do if marginal revenue is greater than marginal cost?
If a firm's marginal revenue is greater than its marginal cost, it should increase production to maximize profits.
If a company's debt is low does marginal cost of capital apply?
Weighted average cost of capital includes cost of debt and cost of equity. Thus irrespective of existing proportion of debt and equity, the marginal cost is always applicable.
What is advantage of using the marginal cost of capital as a company's average hurdle rate?
Using a hurdle rate can help take the emotion out of defining capital value. This is the advantage of using the marginal cost of capital as the hurdle rate.
Why is the marginal cost of capital more relevant to making investment decisions than the historic cost of capital?
because of deprecation
