Quark Productions is more likely to overestimate the value of high-risk projects using its company's cost of capital unless it is using the weighted cost of capital.
The company's cost of capital should change to reflect the high-risk nature of each project. Again, the estimation of high-risk projects does not work with a single figure (cost of capital). Quark Production should evaluate high-risk projects separately, using reflective costs of capital.
Thus, if Quark Productions uses a single company's cost of capital to evaluate all projects, there will be an overestimation of the values of the high-risk projects.
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