Suppose a firm estimates its cost of capital for the coming year at 10%, what are reasonable costs of capital for evaluating average-risk, high-risk, and lo-risk projects?
finance management - drwls, Friday, January 25, 2008 at 12:13pm
A Google search of the phrase "reasonable cost of capital" reveals that this question has been plastered all over the internet in exactly the same form. In a few cases, "answers" are available for a few dollars, which I was not willing to pay.
I am not a business school graduate, but seems to me that if a firm is able to borrow funds at 10%, then that is the cost of capital to that company, regardless of the risk of the project that they apply it to.