Divisional costs of capital are more appropriate when evaluating a project for a line of business when the types of business in a firm are

Question

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Divisional costs of capital are more appropriate when evaluating a project for a line of business when the types of business in a firm are different. This is because each line of business may have different risk levels and require different rates of return. Using a company-wide cost of capital may not accurately reflect the risk of the specific line of business, and therefore may lead to incorrect investment decisions.

Divisional Costs of Capital Are More Appropriate When Evaluating a Project