A firm should continue to invest in capital budgeting projects until its marginal cost of capital is:
A) equal to the net present value (NPV) of the last project purchased.
B) equal to the internal rate of return (IRR) of the first project purchased.
C) equal to the marginal return generated by the last project purchased.
D) equal to the cash generated by the last project purchased.
E) equal to the weighted average cost of all the projects purchased.

Question

Quizplus · Accepted Answer

A firm should continue to invest in projects until the marginal cost of capital equals the marginal return generated by the last project, ensuring that each additional investment yields a return at least equal to its cost.

A Firm Should Continue to Invest in Capital Budgeting Projects