We learned interest rates differ across firms, and it varies with a firm's investment horizons because investors (or lenders) consider borrower's risk. But how do they decide or evaluate the...

Extracted text: We learned interest rates differ across firms, and it varies with a firm's investment horizons because investors (or lenders) consider borrower's risk. But how do they decide or evaluate the borrower's risk? Could you explain it combined with concepts or principles we have learned? (Hint: the opportunity cost of capital, but not limited to.)