If a firm will use only equity funds for a project next year, the ______________

Question

If a firm will use only equity funds for a project next year, the __________________ is the correct discount rate to use in the capital budgeting model.

Word bank: Capital, Capital gain, Capital rationing, Cash outflows, Cheapest, Cost of capital, Debt, Equity, Externalities, Financial- leverage, Fluctuating, Higher, Hybrid, Incremental CFs, Independent, Interest expense, Investor's, IRR, Most expensive, Mutually exclusive, Negative, New stock, NPV rule, Open- market, Operating leverage, Opportunity, Overvalued, Positive, Preferred stock, Shareholder's, Sunk, WACC

Explanation / Answer

If a firm will use only equity funds for a project next year, the cost of capital is the correct discount rate to use in the capital budgeting model. If the firm were financed entirely through common stock issues, then the cost of capital would be equal to its cost of equity.

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.