Capital components A table or graph of a firm's potential investments ranked from the highest internal rate of return to the lowest. Investment opportunity schedule The costs associated with issuing new financial securities. Opportunity cost principle This term refers to the individual sources of the firm's financing, including its debt, preferred stock, retained earnings, and newly issued common equity. Breakpoint The average cost of the next dollar of financial capital raised by a firm. Target capital structure The point along the firm's marginal cost of capital (MCC) curve or schedule at which the MCC increases. Flotation costs A firm's shareholder wealth-maximizing combination of debt, and common and preferred stock. Marginal cost of capital The average cost of a firm's financial capital when averaged across all of its outstanding debt and equity capital. Cost of capital This concept argues that a firm's retained earnings are not free to the firm. Weighted average cost of capital The return required by providers of capital loaned to the firm. Cost of debt The minimum return that must be earned on a firm's investments to ensure that the firm's value does not decrease