In capital budgeting,the ________ is the appropriate discount rate to use when calculating the NPV of an average risk project.

Question

Quizplus · Accepted Answer

The Weighted Average Cost of Capital (WACC) is the appropriate discount rate to use when calculating the NPV of an average risk project. This is because WACC takes into account the cost of both debt and equity financing and represents the rate of return that the company needs to earn to satisfy its investors and creditors. The higher the WACC, the riskier the project, and the lower the net present value of the project.

In Capital Budgeting,the ________ Is the Appropriate Discount Rate to Use