The Subjective Approach to Project Analysis

question 46

Multiple Choice

The subjective approach to project analysis:

• A) is used only when a firm has an all-equity capital structure.
• B) uses the WACC of Firm X as the basis for the discount rate for a project under consideration by Firm Y.
• C) assigns discount rates to projects based on the discretion of the senior managers of a firm.
• D) allows managers to randomly adjust the discount rate assigned to a project once the project's standard deviation has been determined.
• E) applies a lower discount rate to projects that are financed totally with equity as compared to those that are partially financed with debt.

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Definitions:

Emotional Intelligence (EI)

The ability to understand, manage, and articulate one's feelings, while also dealing with others' relationships carefully and with empathy.

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The awareness of one's own personality, emotions, motivations, and wants.

Self-Control

The ability to regulate one's emotions, thoughts, and behavior in the face of temptations and impulses.

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