For a project's cost of capital measured in Swiss francs, one should use Swiss interest rates and beta with respect to Swiss market.

Question

Quizplus · Accepted Answer

This statement is true. The cost of capital of a project should be measured using the interest rates and beta (systematic risk) with respect to the market in which the project is being undertaken. In this case, if the project's cost is being measured in Swiss francs, Swiss interest rates and the beta with respect to the Swiss market should be used. This is because these factors affect the risk and return of the project in its specific location.

For a Project's Cost of Capital Measured in Swiss Francs