Why does economic depression and overheating lead to an increase in the cost of capital?

When the economy is overheated, the expansion remains high, investors' investment risks are high, the expected rate of return is high, and the cost of financing funds for enterprises is high.

When the national economy is depressed, the production of enterprises will be affected and a large number of enterprises will go bankrupt. Therefore, it will also make investors have high investment risk and high expected rate of return, thus increasing the financing cost of enterprises.