Which One of the Following Statements Is Correct

question 92

Multiple Choice

Which one of the following statements is correct?

• A) The subjective approach assigns a discount rate to each project based on other companies in the same category as the project.
• B) Overall, a company makes better decisions when it uses the subjective approach than when it uses its WACC as the discount rate for all projects.
• C) Companies will correctly accept or reject every project if they adopt the subjective approach.
• D) Mandatory projects should only be accepted if they produce a positive NPV when the overall company WACC is used as the discount rate.
• E) The pure play approach should only be used with low-risk projects.

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