Question
Why do we use the overall cost of capital for investment decisions even when only one source of capital will be used (e.g., debt)? Suppose
Why do we use the overall cost of capital for investment decisions even when only one source of capital will be used (e.g., debt)? Suppose a firm estimates its weighted average cost of capital (WACC) to be 10%. Should the WACC be used to evaluate all of its potential projects, even if they vary in risk? If not, what might be reasonable costs of capital for average, high and low-risk projects?
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Entrepreneurial Finance
Authors: Philip J. Adelman, Alan M. Marks
4th Edition
0132434792, 9780132434799
