Assigning Separate Discount Rates to Individual Projects When Determining Which

question 117

Multiple Choice

Assigning separate discount rates to individual projects when determining which projects should be accepted by the firm:

• A) May cause the firm's overall weighted average cost of capital to vary over time if the projects accepted change the overall risk level of the firm.
• B) Will cause the firm's overall cost of capital to remain constant over time.
• C) Will cause the firm's overall cost of capital to decrease over time.
• D) Will change the debt-equity ratio of the firm over time.
• E) Negates the principle goal of creating the most value for the shareholders.

---

Definitions:

Available-for-Sale Debt Securities

Debt instruments not classified as held-to-maturity or trading securities, reported at fair value with unrealized gains or losses in other comprehensive income.

Exchange Rate

The rate at which one currency can be exchanged for another currency, affecting international trade and investments.

Canadian Dollars

The official currency of Canada, represented by the code CAD in the foreign exchange market.

U.S. Dollars

The official currency of the United States, used as a standard monetary unit.