The minimum return that must be earned on a project in order to leave the firm's value unchanged is ________.
A) the internal rate of return
B) the interest rate
C) the cost of capital
D) the compound rate

Question

Quizplus · Accepted Answer

The minimum return that must be earned on a project in order to leave the firm's value unchanged is the cost of capital. This is because the cost of capital represents the minimum rate of return that a company needs to earn on its investments in order to satisfy its investors and maintain its value. Therefore, any project that generates a return less than the cost of capital will result in a loss of value for the firm, and any project that generates a return greater than the cost of capital will result in an increase in value for the firm.

The Minimum Return That Must Be Earned on a Project