Asked by
Bienstar Counseling Services
on Dec 09, 2024
Verified
In using the ___________ approach, we place projects into risk classes in order to assign discount rates.
A) Subjective.
B) Capital analysis.
C) Pure play.
D) SML.
E) Yield play.
Subjective Approach
A method of decision-making or valuation based on personal judgments and opinions rather than objective data.
Risk Classes
Categories of investments grouped together based on their similar level of risk.
Discount Rates
The interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.
- Understand the specific circumstances where a company's weighted average cost of capital (WACC) is appropriate as the discount rate in project analysis.
- Understand the critical role of risk in project evaluation and its influence on capital cost.
Verified Answer
EO
Learning Objectives
- Understand the specific circumstances where a company's weighted average cost of capital (WACC) is appropriate as the discount rate in project analysis.
- Understand the critical role of risk in project evaluation and its influence on capital cost.