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Question
Which is the most expensive source of funds?
Which is the most expensive source of funds?
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Solution
The correct option is C New Equity Shares
Companies may use various sources of funds for their venture. Preferred stock and common stocks are the most common source of funding. Choosing a particular source of funding depends on the risk involved and the expected required rate of return by the investors. Therefore, one need to do the risk assessment before finalizing any source of funds which can be assessed on the cost of capital.Common stock are considered as more expensive source of fund against the preferred stock which has a fixed component of dividend.
Companies may use various sources of funds for their venture. Preferred stock and common stocks are the most common source of funding. Choosing a particular source of funding depends on the risk involved and the expected required rate of return by the investors. Therefore, one need to do the risk assessment before finalizing any source of funds which can be assessed on the cost of capital.
Common stock are considered as more expensive source of fund against the preferred stock which has a fixed component of dividend.
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