The Most Appropriate Discount Rate to Use When Applying a FCFF

question 88

Multiple Choice

The most appropriate discount rate to use when applying a FCFF valuation model is the

• A) required rate of return on equity.
• B) WACC.
• C) risk-free rate.
• D) required rate of return on equity or risk-free rate, depending on the debt level of the firm.
• E) None of the options are correct.

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Definitions:

Cognition

The mental processes that are involved in acquiring, storing, retrieving, and using information and that include sensation, perception, imagery, concept formation, reasoning, decision making, problem solving, and language.

Foot-In-The-Door Technique

A persuasive strategy where a smaller request is made first to increase the likelihood of agreement to a larger request later.

Attitude

A predisposition in one's mindset to appraise an entity positively or negatively, indicating favoritism or antipathy.

Behavior

Behavior refers to the actions or reactions of an organism, usually in relation to its environment, which can be observable or measurable.