Assigning separate discount rates to individual projects when determining which projects should be accepted by the ﬁrm:

Question

Quizplus · Accepted Answer

Assigning separate discount rates to individual projects can lead to changes in the firm's overall risk level, which can affect its weighted average cost of capital (WACC) over time. This is because the cost of capital for each project is based on its risk level, and if the projects with higher discount rates are accepted, the firm's overall risk level will increase, causing its WACC to also increase. Therefore, option A is the correct answer. Option B, C, D, and E are incorrect because they do not accurately reflect the impact of assigning separate discount rates to individual projects on the firm's cost of capital, debt-equity ratio, or goal of creating shareholder value.

Assigning Separate Discount Rates to Individual Projects When Determining Which