The general rule for using the weighted average cost of capital (WACC) in capital budgeting decisions is accept all projects with

Question

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The WACC represents the minimum return that a company must earn on its investments to satisfy its investors. Therefore, the projects accepted must have rates of return greater than or equal to the WACC to generate sufficient returns to satisfy investors and create value for the organization.  Projects with rates of return less than the WACC would result in a decrease in shareholder value over time. Likewise, projects with rates of return equal to or less than the WACC would only generate a return that satisfies the investors, but would not create any value for the organization, resulting in a net loss. Positive rates of return alone are not enough to determine the profitability or viability of a project.

The General Rule for Using the Weighted Average Cost of Capital