What Discount Rate Should Be Used in Net Present Value

question 58

Multiple Choice

What discount rate should be used in Net Present Value assessments?

• A)the weighted average cost of capital of the business.
• B)the government bond rate.
• C)the specific cost of capital associated with funding a particular project.
• D)the expected rate of return required by ordinary shareholders.

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Definitions:

Event's Occurrence

A term referring to the instance or frequency of a specific event happening within a given timeframe or under certain conditions.

Random Phenomenon

A random phenomenon is a natural or physical event that has an unpredictable outcome, with individual occurrences varying in a non-deterministic manner.

Probability

A numeric evaluation of the chance that an event will happen, specified as a number from 0 to 1.

Law of Large Numbers

A principle that states that as a sample size grows, its mean will get closer to the average of the whole population.