Asked by
Jemini Green
on Nov 07, 2024Verified
Which one of the following should be the primary consideration when determining the appropriate cost of capital for a specific project?
A) The initial capital requirement.
B) The risk level of the project.
C) The payback period.
D) The expected net present value.
E) The firm's current cost of capital.
Cost of Capital
The return a company is required to make on its investments to sustain its market value and appeal to investors.
Risk Level
The degree of uncertainty associated with the return on investment, characterizing the potential for financial loss or gain.
Net Present Value
A method used to evaluate the profitability of an investment, calculating the difference between the present value of cash inflows and outflows over a period.
- Acquire knowledge on the subjective technique used for adapting the cost of capital according to project risk.
Verified Answer
DK
Learning Objectives
- Acquire knowledge on the subjective technique used for adapting the cost of capital according to project risk.