When using the subjective approach to project analysis, a firm: must have an all-equity capital structure. uses the WACC of Firm X as the basis for the discount rate for a project under consideration by Firm Y. assigns discount rates to projects based on the discretion of the senior managers of a firm. allows managers to randomly adjust the discount rate assigned to project once the project's standard deviation has been determined. applies a lower discount rate to projects that are financed totally with equity as compared to those that are partially financed with debt
When using the subjective approach to project analysis, a firm: must have an all-equity capital structure. uses the WACC of Firm X as the basis for the discount rate for a project under consideration by Firm Y. assigns discount rates to projects based on the discretion of the senior managers of a firm. allows managers to randomly adjust the discount rate assigned to project once the project's standard deviation has been determined. applies a lower discount rate to projects that are financed totally with equity as compared to those that are partially financed with debt
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:When using the subjective approach to project analysis, a firm:
must have an all-equity capital structure.
uses the WACC of Firm X as the basis for the discount rate for a project
under consideration by Firm Y.
assigns discount rates to projects based on the discretion of the senior
managers of a firm.
allows managers to randomly adjust the discount rate assigned to a project
once the project's standard deviation has been determined
applies a lower discount rate to projects that are financed totally with
equity as compared to those that are partially financed with debt.
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