If a company uses the same discount rate for evaluating all projects,which of the following results is likely?
A) Accepting poor,high-risk projects.
B) Rejecting good,low-risk projects.
C) Accepting only good,low risk projects.
D) Accepting no projects.
E) Answers a and b are both correct.

Question

Quizplus · Accepted Answer

If a company uses the same discount rate for evaluating all projects, they may end up accepting poor, high-risk projects (answer A) and rejecting good, low-risk projects (answer B) due to the lack of consideration for the varying degrees of risk and return associated with each project. Therefore, both answers A and B are correct. However, answer C is unlikely as the company's decision-making process is not taking into account the risk/return tradeoff. Similarly, answer D is also unlikely as the company is not considering any projects at all.

If a Company Uses the Same Discount Rate for Evaluating