A company’s optimal capital budget is found where the investment opportunity schedule [...]
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intersects with the company’s marginal cost of capital.
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2.3. Applying the Cost of Capital to Capital Budgeting and Security Valuation pany’s marginal cost of capital (MCC) may increase as additional capital is raised, whereas returns to a company’s investment opportunities are generally believed to decrease as the company makes additional investments, as represented by the <span>investment opportunity schedule (IOS).2 We show this relation in Figure 1, graphing the upward-sloping marginal cost of capital schedule against the downward-sloping investment opportunity schedule. In the context of a comp
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