When a fiRm Uses the Subjective Approach to Assign Discount

question 308

True/False

When a firm uses the subjective approach to assign discount rates to projects, the firm generally
makes better decisions than it would if it applied the firm's weighted average cost of capital to all
projects.

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Definitions:

Revealed Preferences

An economic theory that determines consumer preferences by observing their purchasing behavior rather than through direct inquiry.

Francs

A currency unit formerly used in France and some other countries, and still used in some territories.

Consumption

The process of using goods and services to satisfy wants or needs.

Revealed Preferences

An economic theory that infers preferences of consumers by observing choices made under budget constraints, instead of through direct inquiry of preferences.