A project with the same level of risk as an all-equity firm should be accepted if the project's:

Question

Quizplus · Accepted Answer

A project with the same level of risk as an all-equity firm should be accepted if its internal rate of return exceeds the firm's cost of equity capital. This is because the cost of equity capital represents the minimum return that a project needs to earn in order to compensate investors for the level of risk they are taking on. If the project's internal rate of return exceeds this minimum required rate of return, then the project is generating enough returns to compensate for the level of risk involved and it should be accepted.

A Project with the Same Level of Risk as an All-Equity