An analyst should evaluate each project at its own opportunity cost of capital. The true cost of capital depends on the particular use of that capital.

Question

Quizplus · Accepted Answer

Each project has its own unique risk profile and cash flow projections, which determine the appropriate cost of capital for that project. Therefore, an analyst should evaluate each project at its own opportunity cost of capital, rather than using a universal cost of capital for all projects.

An Analyst Should Evaluate Each Project at Its Own Opportunity