Question

As a source of financing, once retained earnings have been exhausted, the weighted average cost of capital will

Answer 1

Increase

Step-by-step explanation:

In the case when the retained earnings is exhausted, the company would face the challenge i.e. funds shortage. So to overcome this problem either firm could raise the finds with the help of debt or raise the new capital. Also in the case of funds shortage, there is a high risk that results in high returns and ultimately the weighted average cost of capital would increase