Increase in the cost of borrowing discourages investment

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The chapter argues that investment depends negatively on the interest rate because an increase in the cost of borrowing discourages investment. However, firms often finance their investment projects using their own funds.

If a firm is considering its own funds (rather than borrowing) to finance investment projects, will high interest rates discourage the firm from undertaking these projects? Explain.

Reference no: EM13987216

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