The optimal capital budget is determined by comparing the expected project returns to the company's ____.

Question

Quizplus · Accepted Answer

The optimal capital budget is determined by comparing the expected project returns to the company's marginal cost of capital schedule. This schedule represents the cost of acquiring additional capital for future investments, and it is used to determine the point at which the cost of capital exceeds the expected return on investment for new projects. When the expected return on investment is higher than the marginal cost of capital, the project is considered viable and can be included in the company's capital budget. Therefore, the correct answer is C.

The Optimal Capital Budget Is Determined by Comparing the Expected