Many corporate enterprises fund their capital expansion projects using retained earnings rather than securing bank loans. For these businesses, a significant fall in interest rates is most likely to
increase their capital investment because the opportunity cost of using retained earnings has decreased.
have no effect on their investment decisions because they do not rely on bank lending.
reduce their capital investment because the cost of borrowing has not changed for them.
encourage them to shift all their retained earnings into bank savings accounts to maximize returns.
