Why do we use market interest rate instead of historical interest rates in calculating a firm’s cost of debt? why do we prefer to use market values instead of book values ?/Why do we assume business and financial risk are unchanged when evaluating the cost of capital? discuss the implications of these assumptions on the acceptance and financing of new projects

Why do we use market interest rate instead of historical interest rates in calculating a firm’s cost of debt? why do we prefer to use market values instead of book values ?

2. Why do we assume business and financial risk are unchanged when evaluating the cost of capital? discuss the implications of these assumptions on the acceptance and financing of new projects