The investment opportunity schedule (IOS) plotted on a graph shows:
A) the optimal components for capital financing for a firm.
B) the amount of investment at different rates of return for a firm.
C) the net present values of different projects of a firm.
D) the average cost of capital of a firm.
E) the marginal increase in the weighted average capital due to change in capital components.

Question

Quizplus · Accepted Answer

The investment opportunity schedule (IOS) plotted on a graph shows the amount of investment at different rates of return for a firm. It helps in determining which investment options are best for the company and at what cost. Option A is incorrect because IOS does not provide information on the capital financing components of a firm. Option C is incorrect because the net present values of different projects of a firm are shown on a different type of graph called the net present value profile. Option D is incorrect because the IOS does not provide information on the average cost of capital of a firm. Option E is incorrect because the IOS does not provide information on the weighted average capital.

The Investment Opportunity Schedule (IOS) Plotted on a Graph Shows