To determine the required discount rate to use in calculating a terminal value for project cash flows, you should apply the CAPM,

Question

Quizplus · Accepted Answer

The correct approach to determine the required discount rate using the Capital Asset Pricing Model (CAPM) for calculating a terminal value for project cash flows involves using the weighted average beta of the debt and the equity, based on market values. This method, known as the Weighted Average Cost of Capital (WACC), accurately reflects the company's cost of capital by considering the market value of equity and debt, which better represents the current financial structure and risk.

To Determine the Required Discount Rate to Use in Calculating