Reading 27: Capital Budgeting-LOS e 习题精选 2010, face, procedure, discount, required

土豆妮

Session 8: Corporate Finance
Reading 27: Capital Budgeting

LOS e: Discuss the procedure for determining the discount rate to be used in valuing a capital project and calculate a project’s required rate of return using the capital asset pricing model (CAPM).

 

 

 

 

If central bank actions caused the risk-free rate to increase, what is the most likely change to cost of debt and equity capital?

 

A) Both increase.

B) Both decrease.

C) One increase and one decrease.

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An increase in the risk-free rate will cause the cost of equity to increase. It would also cause the cost of debt to increase. In either case, the nominal cost of capital is the risk-free rate plus the appropriate premium for risk.