It is necessary to assign the appropriate cost of capital for each individual project that reflects that project's ________ when doing capital budgeting.
A)life
B)cash flows
C)riskiness
D)managers

Question

Quizplus · Accepted Answer

The appropriate cost of capital for a project should reflect its riskiness. A project with higher risk should have a higher cost of capital to account for the additional risk. This is important because using the wrong cost of capital can lead to incorrect project evaluation and decision-making. Factors that affect a project's riskiness include the project's market, competition, and regulatory factors.

It Is Necessary to Assign the Appropriate Cost of Capital