When Can the Cost of Capital for a Company as a Whole

question 34

Multiple Choice

When can the cost of capital for a company as a whole be a valid measure of the cost of capital for a particular project?

• A)When market data are available.
• B)When it is not practicable to estimate the cost of capital for individual projects.
• C)When the risk of a new project is the same as the risk of the company's existing assets.
• D)When CAPM is used as an EX POST model.

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Definitions:

Easement

A right granted to use the real property of another for a specific purpose, such as right of way or access to utilities.

Part of the Land

An integral component or feature of a piece of real estate that is considered permanently attached to the land and is included in its legal definition.

Right

An interest given and protected by law. In corporation law, an option to purchase shares given to existing shareholders, permitting them to buy quantities of newly issued securities in proportion to their current ownership.

Easement by Prescription

A legal right to use another's land for a specific purpose, acquired through continuous use over a period as defined by law without the owner’s explicit permission.