The cost of capital for a project should:

Question

Quizplus · Accepted Answer

The cost of capital for a project should be adjusted based on the risk of the project. This is because riskier projects should have a higher cost of capital to compensate investors for taking on more risk. The cost of capital should not be adjusted based on the size of the project, and it should never exceed the cost of capital for the overall firm. The cost of capital should also not remain constant if a decision on accepting the project is delayed, as market conditions can change over time. While the cost of capital should be compared to the internal rate of return of the project, it does not necessarily need to meet or exceed it.

The Cost of Capital for a Project Should