Which of the Following Statements About Discount Rates Is False

question 38

Multiple Choice

Which of the following statements about discount rates is false?

• A) A discount rate for computing NPV cannot change from one period to the next.
• B) The discount rate for a risky investment should be higher than the discount rate for a risk-free investment.
• C) Discount rates can be applied either to the cash flow from a transaction or the taxable income from a transaction.
• D) Statements A. and C. are false.
• E) are false.

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Definitions:

Retained Earnings

The portion of net earnings not paid out as dividends but retained by the company to reinvest in its core business or to pay debt.

Balance Sheet

A business statement that consolidates the assets, debts, and shareholder equity of a company at a certain point.

Net Income

The amount of profit left after all expenses, taxes, and costs have been subtracted from total revenue.

Retained Earnings

The portion of a company's profits not distributed to shareholders as dividends but retained by the company for reinvestment or to pay off debt.