The Subjective Approach to Project Analysis

question 159

Multiple Choice

The subjective approach to project analysis:

• A) Is used only when the firm's cost of capital is unknown.
• B) Uses the market rate of return as the base rate which is then adjusted for the risk level of each project.
• C) Is a purely random allocation of discount rates to various projects.
• D) Allows managers to adjust for the risk level of each project without knowing the actual beta of the project.
• E) Uses the beta of each project to determine the appropriate discount rate for the project.

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Definitions:

Retina

A thin layer of tissue at the back of the eye that contains cells sensitive to light, which convert images into electrical signals sent to the brain.

Receptors

are specialized cells or proteins that detect and respond to external signals such as chemicals, light, or pressure.

Seeing Details

refers to the ability to perceive fine or small elements or differences in objects, images, or scenes.

Cones

Photoreceptor cells in the retina of the eye that function best in relatively bright light and enable humans to perceive color and fine detail.