Question

The cost of capital for a project should: a. never exceed the cost of capital for...

The cost of capital for a project should:

a.

never exceed the cost of capital for the overall firm.
b.

meet or exceed the internal rate of return of the project.
c.

be adjusted based on the risk of the project.
d.

be adjusted based on the size of the project.
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Homework Answers

Answer #1

The Cost of capital for a project should never exceed the cost of capital for the overall firm. So, the correct option will be the first option.

The second option that is given is meet or exceed the internal rate of return on the project. No, if the cost of capital exceeds IRR, then the proposal of project would be declined.

The third option that is be adjusted based on the risk of the project is based on market expectations and market benchmarks.so, it is not the correct option.

Cost of capital is adjusted based weighted average cost of capital, not by the size of the project. Hence option d is also not correct.

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