Financial question?

hello i am new in studying finance. and i meet a question.

a french company gets the chance to invest at a guaranteed 7 percent annual rate of return - that is, 7 percent with minimal risk. assume that french government bonds offer a 5.5 percent return, but investors in the french stock market, probably expect a 12 percent return. what is the opportunity cost of capital?will the investment generate extra value for the company's stockholders?

i am asking that is the lower number must be the cost of capital? and i don't understand the meaning of 7% and 12%?

The opportunity cost of capital is 12 percent, but the capital is placed at a higher risk. The 7 percent is guaranteed, and although you say it is with minimal risk, there must be some risk. The bonds are virtually risk-free because the government is not going to collapse.

Generally, the higher the return, the higher the risk.

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　　Business Investment 　　Business financing 　　Business Invest 　　Business Debt 　　Bond Investment 　　Angel Funds 　　Alternative Investment

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