Each project should be evaluated using its own cost of capital because:
A)of the effectiveness of the capital market in providing opportunities for investors to diversify.
B)diversification by a company creates value for companies.
C)risk of cash flows generated from a project depends upon the entire operations of a company.
D)beta values are readily available on a project-by-project basis.

Question

Quizplus · Accepted Answer

Each project should be evaluated using its own cost of capital because the capital market allows investors to diversify, meaning the project's risk should be assessed independently of the company's overall risk.

Each Project Should Be Evaluated Using Its Own Cost of Capital