The marginal cost of capital is a relevant cost of capital for evaluating a firm's future investment opportunities.

Question

Quizplus · Accepted Answer

This statement is true. The marginal cost of capital reflects the cost of raising additional funds for investment, and it can be used to evaluate the profitability of potential investment opportunities. By comparing the expected returns of a project to its marginal cost of capital, a firm can determine whether the project is likely to create value for shareholders.

The Marginal Cost of Capital Is a Relevant Cost of Capital