It is important to state that a high cost of capital is advantageous for a short-term project because long-term projects are highly influenced by changes in the capital during the whole completion period. However, when the cost decreases, companies can choose to invest in long-term projects because of fewer risks and potentially higher profits. Changes in the WACC can affect the IRR ranking only in terms of the fact that calculations can be complicated because changes in the WACC result in a conflict in estimations of the NPV and the IRR ranking.
If two mutually exclusive projects were being compared, would a high cost of capital favor the long-term or shorter-term project? Why?
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Academic.Tips. (2022) 'If two mutually exclusive projects were being compared, would a high cost of capital favor the long-term or shorter-term project? Why'. 13 October.
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Academic.Tips. (2022, October 13). If two mutually exclusive projects were being compared, would a high cost of capital favor the long-term or shorter-term project? Why? https://academic.tips/question/if-two-mutually-exclusive-projects-were-being-compared-would-a-high-cost-of-capital-favor-the-long-term-or-shorter-term-project-why/
References
Academic.Tips. 2022. "If two mutually exclusive projects were being compared, would a high cost of capital favor the long-term or shorter-term project? Why?" October 13, 2022. https://academic.tips/question/if-two-mutually-exclusive-projects-were-being-compared-would-a-high-cost-of-capital-favor-the-long-term-or-shorter-term-project-why/.
1. Academic.Tips. "If two mutually exclusive projects were being compared, would a high cost of capital favor the long-term or shorter-term project? Why?" October 13, 2022. https://academic.tips/question/if-two-mutually-exclusive-projects-were-being-compared-would-a-high-cost-of-capital-favor-the-long-term-or-shorter-term-project-why/.
Bibliography
Academic.Tips. "If two mutually exclusive projects were being compared, would a high cost of capital favor the long-term or shorter-term project? Why?" October 13, 2022. https://academic.tips/question/if-two-mutually-exclusive-projects-were-being-compared-would-a-high-cost-of-capital-favor-the-long-term-or-shorter-term-project-why/.
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"If two mutually exclusive projects were being compared, would a high cost of capital favor the long-term or shorter-term project? Why?" Academic.Tips, 13 Oct. 2022, academic.tips/question/if-two-mutually-exclusive-projects-were-being-compared-would-a-high-cost-of-capital-favor-the-long-term-or-shorter-term-project-why/.