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Which one of the following is the primary consideration for determining the cost of capital for...

Which one of the following is the primary consideration for determining the cost of capital for a project? Select one: a. The risk level of the project b. The initial capital requirement c. The payback period d. The firm's current cost of capital e. The expected net present value

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Answer #1

Option A is correct. The Risk Level of the project.

Risk determines what to expect in returns out of the project. Higher the risk, higher will be the expectations to get a higher return from the project and vice - versa. Risk is the primary determinant to calculate the cost of capital.

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