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:

Default

Failure to fulfill a legal obligation or agreement, typically in the context of a loan or contractual payment.

Down Payment

An initial payment made when something is bought on credit, representing a portion of the purchase price.

Purchase Price

The amount of money paid or to be paid by the buyer to acquire ownership of a product or property.

Mortgage

A loan specifically designed for the purchase of real estate, in which the property itself serves as collateral.