The optimal capital budget occurs at the point where two curves intersect. Which of the following is (are) one of those curves?
I. Weighted marginal cost of capital curve
II. Investment opportunity curve

Question

The optimal capital budget occurs at the point where two curves intersect. Which of the following is (are) one of those curves? 
I. Weighted marginal cost of capital curve
II. Investment opportunity curve

Quizplus · Accepted Answer

The optimal capital budget occurs at the point where the Weighted Marginal Cost of Capital (WMCC) curve intersects with the Investment Opportunity Curve (IOC). The WMCC represents the cost of financing new investments, while the IOC represents the expected return on those investments. Therefore, the point where these two curves intersect is the optimal capital budget where the company can maximize its returns while minimizing its cost of financing.

The Optimal Capital Budget Occurs at the Point Where Two