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EruIluvatar EruIluvatar
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3 years ago
If a firm applies its overall cost of capital to all its proposed projects, then the divisions within the firm will tend to

▸ receive more funding if they represent the riskiest operations of the firm.

▸ avoid risky projects so that they will receive more funding.

▸ become less risky over time based on the projects that are accepted.

▸ have equal probabilities of receiving funding for their projects.

▸ propose less risky projects than if separate discount rates were applied to each project.
Textbook 
Corporate Finance Online

Corporate Finance Online


Edition: 2nd
Authors:
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finsterchuckfinsterchuck
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3 years ago
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EruIluvatar Author
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3 years ago
You make an excellent tutor!
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Yesterday
I appreciate what you did here, answered it right Smiling Face with Open Mouth
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2 hours ago
Smart ... Thanks!
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