The company cost of capital is the appropriate discount rate for a firm's Select one: a....
The company cost of capital is the appropriate discount rate for a firm's
Select one:
a. risk-free projects
b. average-risk projects
c. high-risk projects
d. low-risk projects
Homework Answers
Answer b. average risk projects
The company cost of capital is appropriate discount rate for an average risk project. This is because average-risk project would carry same risk as the firm. Hence, company's cost of capital would be appropriate.
For a riskier or less risky project, one should adjust the discount rate to reflect the risk associated with the proejct.
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The company cost of capital is the appropriate discount rate for
a firm's
Select one:
a....
In financial analysis, it is important to select an appropriate discount rate. A project's discount rate...
In financial analysis, it is important to select an appropriate discount rate. A project's discount rate must be high to compensate investors for the project's risk. The return that shareholders require from the company as a compensation for their investment risk is referred to as the cost of equity. Consider this case: Weghorst Co, is a 100% equity-financed company (no debt or preferred stock); hence, its WACC equals its cost of common equity. Weghorst Co.'s retained earnings will be sufficient...
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Which is true for a firm's cost of equity: Select one a. It equals risk-free rate...
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In financial analysis, it is important to select an appropriate discount rate. A project's discount rate must be high to compensate investors for the project's risk. The return that shareholders require from the company as a compensation for their investment risk is referred to as the cost of equity. Consider this case: Weghorst Co, is a 100% equity-financed company (no debt or preferred stock); hence, its WACC equals its cost of common equity. Weghorst Co.'s retained earnings will be sufficient...
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In financial analysis, it is important to select an appropriate discount rate. A project's discount rate must be high to compensate investors for the project's risk. The return that shareholders require from the company as a compensation for their investment risk is referred to as the cost of equity. Consider this case: Weghorst Ltd is a 100% equity-financed company (no debt or preference shares); hence, its wACC equals its cost of equity. Weghorst Ltd's retained earnings will be sufficient to...
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