When companies consider investing in a project, they determine the impact of this decision on their overall cost of capital.

• Why do companies use the overall cost of capital for investment decisions even when only one source of capital will be used for the specific project under consideration?
• Discuss.

When computing this cost of capital, does the firm use the historical costs of existing debt or the current costs as determined by the market?

• Why?

Find an article or reference to support your answer and post the URL with your initial response.