Final answer:
The cost of capital used for appraising investment opportunities in a listed company with subsidiaries would typically include the opportunity cost of forgoing other investments and a risk premium for associated risks. If a financial investor decides on a 15% interest rate, considering the risks and alternative returns, then 15% would be the appropriate cost of capital to apply.
Step-by-step explanation:
The cost of capital used for appraising investment opportunities by an investor in a listed company with subsidiaries is essentially the rate of return that the company could earn if it invested its money in an alternative investment with equivalent risk. In this scenario, considering the cost of financial capital is 9% and the firm is able to capture an additional 5% return to society, the company effectively faces an interest rate of 4%. However, when considering purely the financial investor's perspective, who might be contemplating future payments and weighing investment opportunities against the risk involved, a higher rate like a 15% interest rate could be utilized as it encompasses the opportunity cost of capital and a risk premium.
Therefore, if a financial investor determines that the appropriate interest rate to value these future payments is 15%, reflecting the cost of forgoing other investment opportunities together with a risk premium for risks involved, then this would be the cost of capital to use for appraising investment opportunities.