Contributed to the recent subprime mortgage crisis

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Mortgage-backed securities are believed to have contributed to the recent subprime mortgage crisis. Assess the fairness of this statement, providing a rationale for your reasoning and a recommendaWhy do businesses use the overall cost of capital for investment decisions even if they know they will only use one source of capital for the investment? 2. In determining the cost of capital doe we use the historical costs of existing debt and equity or the current costs as determined in the market? Why? 3. Explain why retained earnings have an associated opportunity cost and why is the cost of retained earnings the equivalent of the firm's own required rate of return on common stock (Ke)? 4. How are the weights determined to arrive at the optimal weighted average cost of capital? 5. What is the concept of marginal cost of capital?tion for future use of this type of investment.

Reference no: EM131189079

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