Problems with using the same company-wide cost of capital for all projects potentially include

Question

Quizplus · Accepted Answer

Using the same company-wide cost of capital for all projects can create biases in project selection towards high risk, high return projects, while also potentially rejecting worthwhile low risk projects. Additionally, it may lead to the allocation of an unjustified amount of managerial time and effort justifying a lower cost of capital for particular projects that may be of interest to specific individuals or departments within the company. Therefore, all of the choices listed are potential problems that could arise from using the same company-wide cost of capital for all projects.

Problems with Using the Same Company-Wide Cost of Capital for All