NOTEBOOK.docx - 52. As the cumulative amount of money...

52.
As the cumulative amount of money invested in a firm’s capital projects
increases, its returns on the
projects will increase.
Level of Difficulty: 3
Learning Goal: 6
Topic: WMCC and IOS
53.
While the return will increase with the acceptance of more projects, the
weighted marginal cost of
capital will increase because greater amounts of financing will be required.
Level of Difficulty: 3
Learning Goal: 6
Topic: WMCC and IOS
54.
According to the firm’s owner wealth maximization goal, the firm should
accept projects up to the
point where the marginal return on its investment is equal to its weighted
marginal cost of capital.
Level of Difficulty: 3
Learning Goal: 6
Topic: WMCC and IOS
55.
The cost of capital can be thought of as the “magic number” that is used
to decide whether a
proposed corporate investment will increase or decrease the firm’s stock