1. Introductory concepts Aa Aa Term Answer Description Capital components The average cost of a firm's financial capital when averaged across all of its outstanding debt and equity capital A. B. This concept argues that a firm's retained earnings are not free Investment opportunity schedule to the firm C. The combination of debt, preferred stock, and common equity that will maximize the value of the firm's common stock Opportunity cost principle Breakpoint D. The elements in a firm's capital structure. Target capital structure E. The return that providers of financial capital require to induce them to provide capital to a firm, and the associated cost to the firm for securing these funds The return required by providers of capital loaned to the firm A table or graph of a firm's potential investments ranked from the highest internal rate of return to the lowest. Flotation costs F. Marginal cost of capital G. Cost of capital Weighted average cost of capital Cost of debt H. The costs associated with issuing new financial securities The average cost of the next dollar of financial capital raised by a firm I. J. The amount of capital expenditures made, or to be made, at which the firm's marginal cost of capital increases