Holding risk constant, the implementation of projects with a rate of return above the cost of capital will decrease the value of a firm, and vice versa.

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The cost of common stock equity refers to the cost of the next dollar of financing necessary to finance a new investment opportunity.
The cost of capital is described as the rate of return required by the market suppliers of capital in order to attract their funds to the firm.
The target capital structure is the desired optimal mix of debt and equity financing that most firms attempt to achieve and maintain.
The cost of capital is the rate of return a firm must earn on investments in order to increase the firm"s value.
The cost of capital is used to decide whether a proposed corporate investment will increase or decrease a firm"s stock price.
The cost of capital reflects the cost of funds over the long run measured at a given point in time, based on the best information available.
The cost of capital acts as a major link between a firm"s long-term investment decisions and the wealth of the firm"s owners as determined by the market value of their shares.
The cost of capital of each source of financing is the after-tax cost of obtaining the financing using the historically based cost reflected by the existing financing on the firm"s books.
A firm"s flotation cost can be calculated by weighting the cost of each source of financing by its relative proportion in a firm"s target capital structure.
The cost of capital is a static concept and it is not affected by economic and firm-specific factors such as business risk and financial risk.
The cost of capital is a dynamic concept and it is affected by economic and firm-specific factors such as business risk and financial risk.

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In using the cost of capital, it is important that it reflects the historical cost of raising funds over the long run.
The ________ is the rate of return that a firm must earn on its investments in order to maintain the market value of its stock.A) yield to maturityB) cost of capitalC) internal rate of returnD) modified internal rate of return
The ________ is the rate of return required by the market suppliers of capital in order to attract their funds to the firm.A) yield to maturityB) internal rate of returnC) cost of capitalD) modified internal rate of return
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Connect Finance Online Access for Essentials of Investments9th EditionAlan J. Marcus, Alex Kane, Zvi Bodie
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