Which of the Following Is Not True Regarding the Appropriate

question 9

Multiple Choice

Which of the following is not true regarding the appropriate discount rate to be used in conjunction with discounted cash flow (DCF) decision models?

• A) For projects of "above average" risk, the appropriate discount rate is the weighted-average cost of capital (WACC).
• B) It includes an estimate of the after-tax cost of debt.
• C) It can differ across investment projects, according to perceived risk of each project.
• D) It is also sometimes referred to as the "hurdle rate" for capital budgeting purposes.
• E) It can properly be viewed as the "minimum required rate of return" for a proposed investment.

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Definitions:

Credit Memos

Documents issued by a seller to a buyer, reducing the amount that the buyer owes to the seller under previous agreements.

NSF Check

A check that cannot be processed due to insufficient funds in the account from which it was drawn.

Supplier's Invoice

A document issued by a vendor to a purchaser that details the products or services sold, their quantities, and their prices.

Credit Memo

A document issued by a seller to a buyer, reducing the amount the buyer owes to the seller under previous transactions.