In the net-present-value model, the perfect capital markets assumption means that _____.

Question

Quizplus · Accepted Answer

The perfect capital markets assumption in NPV analysis implies that companies can borrow any amount of money they need at the desired minimum rate of return, implying that lenders are available at competitive market interest rates, irrespective of the company's creditworthiness or purpose of borrowing. In this case, all amounts needed for investment opportunities can be borrowed at the minimum desired rate of return. Options A, B, and D do not fully capture the implications of the perfect capital markets assumption in NPV analysis.

In the Net-Present-Value Model, the Perfect Capital Markets Assumption Means