Question

The answer is NOT A

please which is the right answer?

A firm's WACC for capital budgeting purposes for a planning period is a. The height of the MCC schedule at the expected level of capital spending. b. At the intersection of the MCC and the IOS C. Always beyond the break point of the MCC. d. Usually less than the cost of debt

Answer 1

a firm's WACC for capital budgeting purposes for a planning period

b) is at the intersection of the MCC and IOS

The IOS graph tells us at different interest rates how much money can be invested

The MCC or the marginal cost of capital is a plot of the WACC, which shows the cost of getting another dollar of new capital.

The MCC and the IOS combined are used to determine the optimal capital budget. This is because it shows the cost of raising funds in relation to the respective returns for the project.