Q. How Amount of financing affecting cost of capital?
Amount of financing as the financing require of the firm become larger , the weighted cost of capital increased several reasons . for instance as more securities are issued additional floating costs ( cost of selling securities ) will affect the percentage cost of the funds to the firm ,s size the investment require rate of return arise. Suppliers of capital become hesitant to grant relatively large sums without the evidence of the management capability to absorb the capital into the business. This concern is reflected in the proverbial too much too soon as the size of the issue increase there is a greater difference in placing it in the market without the reducing the price of the security , which also increase the firms cost of the capital.