If Changing Discount Rates from the Company Cost of Capital

question 32

Multiple Choice

If changing discount rates from the company cost of capital to the project cost of capital changes NPV from negative to positive,then the project should use the:

• A) company cost of capital and be accepted.
• B) company cost of capital and be rejected.
• C) project cost of capital and be accepted.
• D) project cost of capital and be rejected.

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Definitions:

Lessor

The party in a lease agreement who owns the asset and grants the lessee the right to use the asset for a specified period.

Lessee

The party in a lease agreement who uses or occupies the leased asset and is obligated to pay the lease payment to the lessor.

Amortization

The method of slowly amortizing the original expense of an intangible asset throughout a specified duration.

Natural Resources

Raw materials that are obtained from the Earth, which can include water, minerals, forests, and fossil fuels.