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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 investmentsAlthough the answer is D
I cannot really understand the option C.
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.
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