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:

Crossed The Chasm

A concept describing the transition of a technology product from early adoption to widespread acceptance and use in the mainstream market.

Bottom-up Analysis

An approach that starts with specific details and flows upwards to identify broader trends and patterns.

Top-down Analysis

An approach that starts with the broader economy or market before analyzing specific sectors or companies.

Predicted Total Sales

An estimation of the total amount of sales revenue a business expects to earn over a specified future period.