A single, overall cost of capital is often used to evaluate projects because:

The correct answer is A. It avoids the problem of computing the required rate of return for each investment proposal. See the full explanation below for the reasoning.

Investment Management

Question

Options

AIt avoids the problem of computing the required rate of return for each investment proposal
BIt is the only way to measure a firm's required return
CIt acknowledges that most new investment projects have about the same degree of risk
DIt acknowledges that most new investment projects offer about the same expected return

How the community answered

(33 responses)

A
73% (24)
B
3% (1)
C
6% (2)
D
18% (6)

Topics

#cost of capital#capital budgeting#required return#WACC

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