One Flaw with Using a Higher Discount Rate to Account

question 60

Multiple Choice

One flaw with using a higher discount rate to account for flotation costs is:

• A)It increases the cost of capital
• B)It assumes a negative cash outflow for flotation costs
• C)Such an adjustment assumes level or constant growth cash flows
• D)This discount rate is the rate of return only for projects with lower risk

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Definitions:

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