Final answer:
The minimum acceptable rate of return on a capital investment is primarily determined by the available alternative investment opportunities, reflecting the opportunity cost and a risk premium for potential higher risks involved.
Step-by-step explanation:
The minimum acceptable rate of return on a capital investment is determined by the availability of alternative investment opportunities. This is because the interest rate chosen by an investor reflects the rate of return on these alternative opportunities, which is essentially the opportunity cost of capital, as well as accounting for an additional risk premium if the investment is deemed particularly risky. In practical terms, if an investor is deciding between different investments, they will typically opt for one that offers a higher return than what they can receive from risk-free or low-risk investments such as government bonds. Therefore, a financial investor might decide on a rate like 15% if that aligns with the higher risk and potential return compared to other market options. The expected rate of return, risk, and liquidity are all critical factors that contribute to this decision-making process.