The Discount Rate Assigned to an Individual Project Should Be

question 41

Multiple Choice

The discount rate assigned to an individual project should be based on:

• A)the firm's weighted average cost of capital.
• B)the actual sources of funding used for the project.
• C)an average of the firm's overall cost of capital for the past five years.
• D)the current risk level of the overall firm.
• E)the risks associated with the use of the funds required by the project.

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Definitions:

Periodic Tenancy

A tenancy that automatically renews for successive periods (e.g., month-to-month, year-to-year) until either the landlord or the tenant terminates it.

Tenancy at Will

An agreement where a tenant can occupy property with the consent of the owner but with no fixed term and can be terminated by either party at any time.

Tenancy at Sufferance

A legal situation where a tenant remains in possession of property after the expiration of the lease, without the landlord's consent.

Fee Simple Tenancy

The most complete form of ownership of real property, giving the holder full possessory rights and responsibilities now and in the future.