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) represents the average cost of financing a company's assets and is an appropriate discount rate to use when evaluating projects with average risk. It takes into account the cost of both debt and equity financing and reflects the overall risk of the company. Therefore, it is the most appropriate discount rate to use when calculating the Net Present Value (NPV) of an average risk project. IRR, cost of debt, and cost of equity are also important metrics in capital budgeting, but they are not the most appropriate discount rates to use for projects with average risk.

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