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In general, firms should use their weighted average cost of capital (WACC) to evaluate capital budgeting projects because most projects are funded, with general corporate

In general, firms should use their weighted average cost of capital (WACC) to evaluate capital budgeting projects because most projects are funded, with general corporate funds, which come from a variety of sources. However, if the firm plans to use only debt or only equity to fund a particular project, it should use the after-tax cost of that specific type of capital to evaluate that project.

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