Use of the Marginal Cost of Capital

question 53

Multiple Choice

Use of the marginal cost of capital:

• A) acknowledges that when retained earnings is used up as a source of equity the cost of capital decreases as new common stock is sold to support more growth.
• B) recognizes that the return from the last dollar of funds generated should be less than the cost of the last dollar of funds raised.
• C) is highly dependent on the investment opportunities available to the firm.
• D) is the cost of borrowing privately.

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Definitions:

Pay Grades

Sets of jobs having similar worth or content, grouped together to establish rates of pay.

Market Rates

The prevailing price or salary range for goods, services, or labor in a specific industry or geographic area.

Key Jobs

Positions that are crucial for the operation and success of an organization, often requiring specialized skills or serving critical functions.

Pay Surveys

Research conducted to gather and analyze salary data from various organizations to establish industry or regional benchmarks for compensation.