In present value analysis,most companies require a rate of return that is higher than the discount rate because of the degree of risk in any project compared with investing in a bond.

Question

Quizplus · Accepted Answer

This statement is true. Companies require a higher rate of return than the discount rate to compensate for the additional risk involved in investing in a project compared to investing in a relatively safe option like a bond.

In Present Value Analysis,most Companies Require a Rate of Return