The Discount Rate Assigned to an Individual Project Should Be

question 79

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 risk level of the project itself.

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Definitions:

Process Costing System

A method of costing used where identical or similar items are produced in mass, costs are accumulated for a fixed period and assigned to all units produced.

FIFO Method

"First In, First Out" inventory valuation method where goods purchased or produced first are sold or used first.

Inventory Costing

A method used to assign costs to inventory items, which affects the cost of goods sold reported and the inventory's valuation on the balance sheet.

General Journal Entries

Accounting records that document all the financial transactions of a company, used to transfer information to the master ledger.