Which of the Following Statements About Discount Rates Is True

question 43

Multiple Choice

Which of the following statements about discount rates is true?

• A) The higher the marginal tax rate, the higher the discount rate for future cash flows should be.
• B) The higher the degree of risk involved in a transaction, the higher the discount rate for future cash flows should be.
• C) The longer the time period over which a transaction will generate cash flows, the higher the discount rate should be.
• D) The greater the amount of cash generated by a transaction, the higher the discount rate should be.

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Definitions:

Core Competency

Fundamental strengths or unique advantages that give a business a competitive edge over others in its industry.

Area

A specific geographical region or a segment of space designated for a particular purpose or characterized by a unique feature.