The cost of capital for a project in Spain should

Question

Quizplus · Accepted Answer

The cost of capital for a project should be a function of the riskiness of the project itself as it takes into account the specific risks associated with the project, such as political risk or currency risk, and allows for a more accurate assessment of the project's profitability. The cost of capital cannot be based solely on the parent's weighted average cost of capital or the required return for a similar investment in the U.S. as these factors do not take into account the specific risks of the project. The minimum rate of return necessary to induce investors to buy or hold the firm's stock is also not necessarily relevant to the cost of capital for a specific project.

The Cost of Capital for a Project in Spain Should