How to Evaluate Mixed Risk Capital Projects Should companies use a reinvestment rate distinct from the cost of capital or the internal rate of return? How should a mixture of risks be handled?

• Published in: Management accounting (New York, N.Y.) Vol. 62; no. 6; p. 34
• Main Authors: Glahn, Gerald L, Fields, Kent T, Trapnell, Jerry E
• Format: Magazine Article
• Language: English
• Published: Montvale Institute of Management Accountants 01.12.1980
• ISSN: 0025-1690

The return on investment used by most companies as the criterion for evaluating capital projects is their cost of capital. A company's cost of capital represents the minimum amount it must expect to earn on a project in order to pay the cost of funds used to finance the project. The cost of capital is generally the composite cost of the sources of funds being used by the company: long-term debt...