The Appropriate Discount Rate to Use When Analyzing a Refunding

question 21

True/False

The appropriate discount rate to use when analyzing a refunding decision is the after-tax cost of new debt, in part because there is relatively little risk of not realizing the interest savings.

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Definitions:

Sample Sizes

Refers to the number of observations or data points collected in a sample from a population.

Normally Distributed

A probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.

Wilcoxon Signed Rank Test

A non-parametric test that compares two paired or matched samples to assess if their population mean ranks differ.

Significance Level

A threshold in hypothesis testing that determines the probability of rejecting a null hypothesis when it is true, commonly set at 0.05 or 5%.