You have been asked to analyze a project where the analyst has estimated the return on capital to be 37 over the ten year lifetime of the project The cost of capital is only 12 , but you have concerns about using the return on capital as an investment decision rule Would it make a difference if you...

The average return on capital is overstated when ac ...

You have been asked to analyze a project where the analyst has estimated the return on capital

Question:

You have been asked to analyze a project where the analyst has estimated the return on capital to be 37% over the ten-year lifetime of the project. The is only 12%, but you have concerns about using the return on capital as an investment decision rule. Would it make a difference if you knew that the project was employing an accelerated depreciation method to compute depreciation? Why?
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...