A company with a 12% cost of capital will consider pursuing a project which yields a 10% return per annum because it will increase the value of the company

Question

Quizplus · Accepted Answer

The company should only pursue a project if the return on investment is higher than the cost of capital. In this case, the project's return is lower than the company's cost of capital, so pursuing it would actually decrease the value of the company. Therefore, this statement is false.

A Company with a 12% Cost of Capital Will Consider