What Discount Rate Should Be Used in Net Present Value

question 49

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:

Psychological Determinants

Factors of psychological origin that influence an individual's behaviors, attitudes, and perceptions.

Group Polarization

describes the phenomenon where discussions within a group lead to an amplification of the group’s initial attitude, making their final stance more extreme.

Overconfidence Bias

A cognitive bias where an individual's subjective confidence in their judgments is greater than their objective accuracy, leading to overly optimistic assessments and decision-making errors.

Majority Viewpoint

refers to the opinion or belief held by the greater number of individuals within a group or society.