When a firm uses the subjective approach to assign discount rates to projects, the firm will assign its highest discount rate to those projects which are mandated by the Government.

Question

Quizplus · Accepted Answer

The subjective approach to assigning discount rates allows firms to adjust rates based on their assessment of a project's risk, not necessarily on whether a project is government-mandated. Government-mandated projects do not automatically receive the highest discount rate; the rate depends on the perceived risk and other factors specific to each project.

When a Firm Uses the Subjective Approach to Assign Discount