Question
Projects should always be discounted at the firm's overall cost of capital.
True false question.
True
False
True false question.
True
False
Answers
GPT-4o mini
False.
Projects should generally be discounted at the rate that reflects their specific risk and cost of capital, which may differ from the firm's overall cost of capital. Using the firm's overall cost of capital may not accurately reflect the risk profile of individual projects. For example, a project with higher risk should be discounted at a higher rate than the overall cost of capital, while a lower-risk project may be discounted at a lower rate.
Projects should generally be discounted at the rate that reflects their specific risk and cost of capital, which may differ from the firm's overall cost of capital. Using the firm's overall cost of capital may not accurately reflect the risk profile of individual projects. For example, a project with higher risk should be discounted at a higher rate than the overall cost of capital, while a lower-risk project may be discounted at a lower rate.