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Unformatted text preview: stockholders hold diversified portfolios of stocks. In theory, market risk should be most relevant because of its direct effect on stock prices. 10-5 If a company’s composite WACC estimate were 10 percent, its managers might use 10 percent to evaluate average-risk projects, 12 percent for those with high-risk, and 8 percent for low-risk projects. Unfortunately, given the data, there is no completely satisfactory way to specify exactly how much higher or lower we should go in setting risk-adjusted costs of capital....
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08