Large Firms Find External Funds to Be More Costly Than

Multiple Choice

Large firms find external funds to be more costly than internal funds because

A) they must pay taxes on external funds but not on internal funds.
B) external funds must be raised in financial markets, whereas internal funds may be raised from banks.
C) legally a portion of external funds must be distributed to shareholders, whereas all internal funds may be used for investment projects.
D) outside investors require a higher return to compensate them for having to obtain information about the firms.