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Sagot :
It is false that projects should always be discounted at the firm's overall cost of capital .
A firm's overall cost of capital is simply the sum of the firm's cost of equity, cost of debt, and cost of preferred stock.
A company's investment decisions for new projects should always generate a return that exceeds the firm's cost of the capital used to finance the project. Otherwise, the project will not generate a return for investors.
A company investing on a project must know how much money the project will have to generate in order to offset the cost of capital undertaking it and then continue to generate profits for the company.The discount rate makes it possible to estimate how much the project's future cash flows would be worth in the present.
To learn more about firm's overall cost of capital here
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