Which of the Following Is NOT One of the Primary

question 8

Multiple Choice

Which of the following is NOT one of the primary difficulties companies face in arriving at an appropriate discount rate for short-term decisions?

• A)the time horizon is too short to allow use of a long-term average cost of capital
• B)difficulty in incorporating risk
• C)treasurers rarely raise monies for short-term projects
• D)the absence of current market data for short-term interest rates

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Definitions:

Implicit Cost

The opportunity cost incurred by using assets, resources, or funds for a specific purpose rather than the next best alternative.

Competitive Rate

Pricing that is on par or better than what is offered by competitors in the market, often used to attract customers.

Property Taxes

Levies imposed by local governments on real estate properties, calculated based on the value of the property.

Opportunity Costs

Sacrificing potential profits from other possibilities when a certain option is selected.