Discuss the connection between capital budgeting decisions and the enterprise's cost of capital. Would an enterprise ever decide to embark on a project whose rate of return would be less than its cost of capital? Why or why not?

In determination of the capital budgeting, main component is known by cost of capital of company. The cost of capital is the cost which the company actually has to pay for the purpose of getting the fund which will be actually used in the capital budgeting.

The company has an opportunity to get a return which is actually less than the cost of capital. An investment where return is actually less than capital cost is not considered as the rational investment as from investment company actually earns less & has to pay more to capital. Hence, it is not considered as a rational investment decision.