Q. According to traditional approach, the average cost of capital
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(A)
Remains constant up to a degree of leverage and rises sharply thereafter with every increase in leverage.
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(B)
Rises constantly with increase in leverage.
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(C)
Deceases up to a certain point, remains unchanged for moderate increase in leverage and rises beyond a certain point.
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(D)
Decreases at an increasing rate with increase in leverage.
✅ Correct Answer: (C)
Deceases up to a certain point, remains unchanged for moderate increase in leverage and rises beyond a certain point.