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Asset replacement decisions

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Asset replacement decisions

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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    Posts
  • December 31, 2021 at 3:24 am #645106
    johnbriane
    Member
    • Topics: 170
    • Replies: 160
    • ☆☆☆

    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.

    December 31, 2021 at 1:43 pm #645124
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    There 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.

    January 5, 2022 at 11:50 am #645340
    johnbriane
    Member
    • Topics: 170
    • Replies: 160
    • ☆☆☆

    What kind of costs will arise when raising investments sir

    January 5, 2022 at 2:40 pm #645351
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    Advertising 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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