The cost of capital influences investment decisions from "summary" of How Finance Works by Mihir Desai
In making investment decisions, firms must carefully consider the cost of capital. This concept represents the return that investors require in order to provide capital to the firm. It reflects the opportunity cost of using funds to invest in one project rather than another. The cost of capital is a crucial factor in determining whether a particular investment will be profitable or not. When evaluating potential projects, firms will compare the expected return on investment to the cost of capital. If the expected return ...
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