单选题 Which of the following statements regarding capital budgeting is correct? A firm"s optimal capital budget can be found by moving along its investment opportunity schedule until:

A、 it exhausts its capital budget.
B、 the marginal revenue product is equal to marginal cost.
C、 the next project"s return no longer covers the marginal cost of capital.

【正确答案】 C

【答案解析】The firm would not want to exhaust its capital budget on "bad" projects, (i. e. projects with IRR＜cost of capital [NPV＜0]). They should continue to invest as long as the project"s return is greater than the marginal cost of capital of the firm. When the project"s IRR=cost of capital, the NPV=0. This project will only make the firm larger; it will add nothing to the stock price. The investment opportunity schedule plots expected project returns from highest to lowest IRR.