Question

If all projects are assigned the same discount rate for purposes of​ evaluation, which of the following could​ occur? A. Highminusrisk projects could be accepted when in fact they are poor investment choices. B. Lowminusrisk projects could be rejected when in fact they are good investment choices. C. Highminusrisk projects could be accepted when in fact they are good investment choices. D. All of the choices could occur when using a single discount rate for all projects.

Answer 1

Answer:

D. All of the choices could occur when using a single discount rate for all projects.

Explanation:

• The discount rate is the rate of return that is used to discount the cash flows analysis in determining the present and future values of cash flows.

• The discount rate also called the discounted cash flow analysis follows the valuation method based on the time concept of money the DFC helps to find out the variability of the project by calculating the present values by the discounted rate.

• Thus if all the projects are assigned the same discount rates then the aim of revaluation of the project choices will be the same for all the projects like investing in standards assets like the bonds.