Why Can It Be Incorrect to Evaluate All Capital Budgeting

question 19

Essay

Why can it be incorrect to evaluate all capital budgeting proposals at the firm's current weighted-average cost of capital?

---

Definitions:

Limited Liability Company

A business structure in the United States that provides its owners with limited liability while allowing the benefits of pass-through taxation.

Guarantees Payment

Refers to the assurance provided by one party to another that payment will be made according to the agreed terms and conditions.

Personally Liable

Being directly responsible for the fulfillment of an obligation or the compensation of a loss, often in a personal capacity rather than corporate.

Wrongful Acts

Actions that are illegal or immoral, causing harm or damage to others.