Look again at Problem 7, which asked you to assume that the 6.5% interest rate was the

Question:

Look again at Problem 7, which asked you to assume that the 6.5% interest rate was the opportunity cost of capital. Was that a reasonable assumption? What should the opportunity cost of capital for inventory depend on? Would it ever make sense to use the firm’s overall weighted average cost of capital? What if the inventory was not spare parts for a railroad, but a risky commodity, for example crude oil stocks held as raw material for a petrochemical plant? Discuss and explain.

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...

Fantastic news! We've Found the answer you've been seeking!