Marginal
Cost of Capital (MCC)
The cost
of obtaining another dollar of new capital; the weighted average cost
of the last dollar of new capital raised.
Marginal
Investor
A representative
investor whose actions reflect the beliefs of those people who are currently
trading a stock. It is the marginal investor who determines a stock's
price.
Marginal
Tax Rate
The tax
rate applicable to the last unit of a person's income.
Market
Portfolio
A portfolio
consisting of all stocks.
Market
Price Po
The price
at which a stock sells in the market.
Market
Risk
That part
of a security's risk that cannot be eliminated by diversification.
Market
Risk Premium, RPM
The additional
return over the risk-free rate needed to compensate investors for assuming
an average amount of risk.
Market
Value Added (MVA)
The difference
between the market value of equity and the amount of equity capital
that investors supplied.
Market
Value Ratios
A set
of ratios that relate the firm's stock price to its earnings and book
value per share.
Market,
or Beta, Risk
That part
of a project's risk that cannot be eliminated by diversification; it
is measured by the project's beta coefficient.
Market/Book
(M/B) Ratio
The ratio
of a stock's market price to its book value.
Marketable
Securities
Securities
that can be sold on short notice.
Maturity
Date
A specified
date on which the par value of a bond must be repaid.
Maturity
Matching, or "Self-Liquidating," Approach
A financing
policy that matches asset and liability maturites. This is a moderate
policy.
Maturity
Risk Premium (MRP)
A premium
which reflects interest rate risk.
Merger
The combination
of two firms to form a single firm.
Moderate
Current Asset Investment Policy
A policy
that is between the relaxed and restricted policies.
Modified
IRR (MIRR)
The discount
rate at which the present value of a project's cost is equal to the
present value of its terminal value, where the terminal value is found
as the sum of the future values of the cash inflows, compounded at the
firm's cost of capital.
Money
Market Fund
A mutual
fund that invests in short-term, low-risk securities and allows investors
to write checks against their accounts.
Money
Markets
Then financial
markets in which funds are borrowed or loaned for short periods (less
than one year).
Monte
Carlo Simulation
A risk
analysis technique in which probable future events are simulated on
a computer generating estimated rates of return and risk indexes.
Mortgage
Bond
A bond
backed by fixed assets. First mortgage bonds are senior in priority
to claims of second mortgage bonds.
Multinational,
or Global Corporation
A firm
that operates in an integrated fashion in a number of countries.
Multiple
IRRs
The situation
where a project has two or more IRRs.
Municipal
Bonds
Bonds
issued by state and local governments.
Mutually
Exclusive Projects
A set
of projects where only one can be accepted.
marginal
Cost of Capital (MCC) Schedule
A graph
that relates the firm's weighted average cost of each dollar of capital
to the total amount of new capital raised.
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