The Company Cost of Capital May Be an Inappropriate Discount

question 93

Multiple Choice

The company cost of capital may be an inappropriate discount rate for a capital budgeting proposal if:

• A) it results in a negative NPV for the proposal.
• B) the project has a different degree of risk from the company.
• C) the company has specific risk.
• D) the company expects to earn more than the risk-free rate.

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Definitions:

Factual Basis

Factual basis refers to the underlying real facts or data that support a statement, argument, or hypothesis.

Delusions

False beliefs held despite strong evidence against them, often occurring as a symptom of psychiatric disorders.

Antisocial Personality

A mental health condition defined by a persistent tendency to ignore or infringe upon the rights of other individuals over an extended period.

Disorganized Speech

A symptom often observed in schizophrenia and other psychological disorders, characterized by a lack of clear and coherent speech, making it difficult to understand.