If the probability of an investment's cash inflows is decreased, the firm's cost of capital should be increased.

Name: If the probability of an investment's cash inflows is decreased, the firm's cost of capital should be increased.
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Question

If the probability of an investment's cash inflows is decreased, the firm's cost of capital should be increased.​

Quizplus · Accepted Answer

If the probability of an investment's cash inflows is decreased, the risk associated with the investment increases. This increased risk will make the investment less attractive to investors, and as a result, the firm's cost of capital will increase.

If the Probability of an Investment's Cash Inflows Is Decreased