Draw a graph similar to the one shown in exhibit 9 4 and explain its implications Data from Exhibit 9 4 Ann Arbor Health Care Corporate and Project Costs of Capital The key point here is that the CCC is merely a benchmark that will be used as the basis for estimating project costs of capital It is ...

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Draw a graph similar to the one shown in exhibit 9.4 and explain its implications. Data from

Question:

Draw a graph similar to the one shown in exhibit 9.4 and explain its implications.

Data from Exhibit 9.4

Ann Arbor Health Care: Corporate and Project Costs of Capital

Project Cost of Capital (%) 11.7 9-7 7.7 Project L Corporate Average (Project A) Project H Risk

The key point here is that the CCC is merely a benchmark that will be used as the basis for estimating project costs of capital. It is not a one-size-fitsall rate that can be used with abandon whenever an opportunity cost is needed in a financial analysis. This point is revisited in chapter 12, when capital investment risk considerations are addressed.