Sir this is testing your understanding 9
Which of the following is not a reason for hard capital rationing?
A Lending institutions may consider the company to be too risky
B There are restrictions on lending due to government control
C The costs associated with making small issues of capital may be too great
D Desire to maximise return of a limited range of investments
Although the answer is D
I cannot really understand the option C.
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Asset replacement decisions
4y ago#1There are always costs involved when raising more capital. If they are only raising a small amount then the costs may take up too much of the money being raised.
What kind of costs will arise when raising investments sir
4y ago#3Advertising the share issue, paying merchant banks for advice or for a placing, paying underwriters. I explain these in my free lectures on Sources of Finance.
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