The marginal cost of capital necessary to raise the next marginal dollar of financing is relevant for evaluating the firm's future investment opportunities.

Question

Quizplus · Accepted Answer

The marginal cost of capital is the cost of raising the next marginal dollar of financing. It represents the cost of the firm's total financing mix, including debt, equity, and any other financing sources. Since the cost of capital is a significant factor in determining the profitability of potential investments, it is relevant for evaluating the firm's future investment opportunities.

The Marginal Cost of Capital Necessary to Raise the Next