A firm's cost of capital can be used in valuation of every new project it encounters,regardless of its risk.

Question

Quizplus · Accepted Answer

A firm's cost of capital reflects the overall riskiness of the firm's assets and projects. Therefore, it is not appropriate to use the same cost of capital for every new project, as different projects may have different levels of risk. The cost of capital should be adjusted based on the project's risk profile.

A Firm's Cost of Capital Can Be Used in Valuation