Two fundamental financial principles were woven throughout the fabric of your course in Financial Administration. They are the time value of money and the relationship between risk and return. First, explain each of these principals. Then, define weighted average cost of capital and how it is determined with specific attention to where risk and return factor into the determination of a firm's weighted average cost of capital. Finally, explain how a corporation uses its weighted average cost of capital to make corporate investment decisions with specific attention to how the time value of money is used to make investment decisions. Use as many of the following terms as appropriate in your answer written response: Cost of preferred stock Cost of common equity Discounted cash flow Net present value Present value Future value Discounting Compounding Risk Stand-alone risk Probability distribution and its relation to risk Expected rate of return Continuous probability distribution Standard deviatiorn Risk aversion Risk premium for Stock Market risk premium Capital Asset Pricing Model (CAPM) Expected return on a portfolio Market portfolio Correlation coefficient Market risk Diversifiable risk Relevant risk Beta coefficient Security Market Line (SML) After-tax cost of debt After-tax cost of short term debt