What is the cost of capital


Questions:

1. What is the cost of capital? What role does it play in capital investment decisions?

2. The IRR is the true or actual rate of return being earned by the project. Do you agree or disagree? Discuss.

3. Explain how the NPV is used to determine whether a project should be accepted or rejected.

4. Explain why NPV is generally preferred over IRR when choosing among competing or mutually exclusive projects. Why would managers continue to use IRR to choose among mutually exclusive projects?

5. Why is it important to have accurate projections of cash flows for potential capital investments?

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Accounting Basics: What is the cost of capital
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