The Required Rate of Return Is a Critical Variable in Discounted

question 9

Multiple Choice

The required rate of return is a critical variable in discounted cash flow analysis because it

• A) measures the risk of the return.
• B) sets the minimum which management will accept for a capital budgeting decision.
• C) is the firm's after-tax discount rate.
• D) is the rate of return that the firm forgoes by investing in a particular project rather than investing in an alternative project of comparable risk.
• E) equals the accrual accounting rate of return, net of tax.

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