The appropriate cost of capital for a project depends on ...

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The appropriate cost of capital for a project depends mostly on the risk associated with the project. This is because the cost of capital is the minimum rate of return that the project must generate in order to compensate investors for the risk they are taking. Projects with higher risk will require a higher rate of return, which will increase the cost of capital. Factors such as the type of assets used or the type of security issued can have some impact on the cost of capital, but they are typically secondary to the level of risk involved. The interest rate on the firm's outstanding long-term bonds may reflect the overall cost of capital for the firm, but it may not be appropriate as the cost of capital for a specific project.

The Appropriate Cost of Capital for a Project Depends on