A proposed project has a positive NPV when evaluated at the company cost of capital. If the firm employs debt in its capital structure, will the project remain acceptable after evaluation with the WACC?

Question

Quizplus · Accepted Answer

Using the WACC incorporates the cost of debt, which is typically lower than the cost of equity, potentially increasing the NPV due to the tax shield provided by debt financing.

A Proposed Project Has a Positive NPV When Evaluated at the Company