Ted is trying to decide what cost of capital he should assign to a project.Which one of the following should be his primary consideration in this decision?

Question

Quizplus · Accepted Answer

The risk level of the project is the primary consideration in determining the cost of capital. The higher the risk, the higher the cost of capital should be to compensate for that risk. Factors such as the mix of funds, length of the project's life, use of preferred stock, and amount of debt used to finance the project are also important, but they are secondary considerations to the risk level.

Ted Is Trying to Decide What Cost of Capital He