When a firm uses the subjective approach to assign discount rates to projects, the firm risks accepting projects which should have been rejected.

Question

Quizplus · Accepted Answer

Using the subjective approach for assigning discount rates can lead to inaccuracies in evaluating the true cost of capital or risk associated with a project, potentially leading to the acceptance of projects that do not meet the firm's required return thresholds.

When a Firm Uses the Subjective Approach to Assign Discount