The selection of an appropriate discount rate for a particular project is primarily dependent upon the project's

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The appropriate discount rate for a project is primarily dependent upon the project's level of risk. The discount rate reflects the expected rate of return needed to compensate for the riskiness of the project. A higher level of risk will require a higher discount rate and vice versa. Other factors such as the initial cost, time to closure, starting date, and expected dollar return may also be considered, but they are not the primary determinants of the discount rate.

The Selection of an Appropriate Discount Rate for a Particular