The Most Appropriate Discount Rate to Use When Applying a FCFE

question 98

Multiple Choice

The most appropriate discount rate to use when applying a FCFE valuation model is the

• A)required rate of return on equity.
• B)WACC.
• C)risk-free rate.
• D)None of the options

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Definitions:

Indirect and Regressive

Pertaining to taxes that are the same rate for all, regardless of income, often resulting in a higher tax burden on lower-income individuals compared to higher-income ones.

Fiscal Year

A one-year period that companies and governments use for financial reporting and budgeting, which does not necessarily align with the calendar year.

Federal Government

The federal government is the national government, which holds the ultimate authority over a federated country, responsible for executing laws, and managing national affairs and foreign policy.

Federal Budget

The government's plan for revenue and expenditures for a fiscal year, detailing how federal funds will be spent and collected.