Maria D'Souza plans to expand its business by introducing a new product line of frozen foods. She wanted me to evaluate the attractiveness of the new extension by evaluating the net present value (NPV) of the expected cash flows. Its main task was to find a suitable discount rate to be applied to the cash flows to determine the NPV of the project. D'souza's consultant friend asked her analysis of the cost of capital of similar companies in the same industry. The basic principle here is that firms in the same industry often have similar customers, operations and assets. Therefore, they have similar business risk and should have similar costs of capital "Hide
by SK Mitra Source: Richard Ivey School of Business Foundation 6 pages. Publication Date: November 22, 2012. Prod. #: W12324-PDF-ENG
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