When a Company Is Evaluating an Investment with Discounted Cash

question 63

True/False

When a company is evaluating an investment with discounted cash flows, if the investment has a higher risk, the company will use a lower discount rate, and vice versa.

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Definitions:

Anglo-American Law

A legal system originating in England and now prevalent in the United States and many Commonwealth countries, characterized by the doctrine of precedent.

Currency Substitute

Any means of payment used in lieu of traditional money (coins and banknotes) for the transaction of goods and services.

Enforceable Contract

An agreement between parties that is legally binding and can be upheld in a court of law.

Negotiable Instruments

Financial documents that are transferable from one person to another, designed to guarantee the payment of a specific amount of money either on demand or at a set time.