The Discount Rate Is Adjusted

question 36

Multiple Choice

The discount rate is adjusted:

• A) upward to reflect higher risk and to increase the future cash flows.
• B) upward to reflect higher risk and to reduce the future cash flows.
• C) downward to reflect higher risk and to increase the future cash flows.
• D) downward to reflect higher risk and to reduce the future cash flows.

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Definitions:

Investing Decisions

Choices made by individuals or companies regarding where to allocate resources, often considering the potential for profits or losses, to achieve financial growth.

Investment Center

A business unit within an organization that is responsible for its own revenue, expenses, and investments, and is evaluated based on its return on investment.

Profit Center

A separate business unit or department within an organization that is responsible for generating its own revenue and profits.

Direct Expenses

Expenses that can be directly attributed to the production of specific goods or services, such as raw materials and labor costs.