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

Question

Quizplus · Accepted Answer

Using the subjective approach for assigning discount rates can lead to inaccuracies in evaluating a project's value, potentially causing a firm to reject profitable projects due to overestimation of risks or underestimation of returns.

When a Firm Uses the Subjective Approach to Assign Discount