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 firm using the subjective approach may consider multiple factors such as the riskiness of the project, the company's cost of capital, and market conditions to assign discount rates to projects. The mandate by the government alone may not result in the highest discount rate being assigned to the project.

When a ﬁRm Uses the Subjective Approach to Assign Discount