If all projects are assigned the same discount rate for purposes of evaluation,which of the following could occur?
A)Low-risk projects could be rejected when in fact they are good investment choices.
B)High-risk projects could be accepted when in fact they are poor investment choices.
C)High-risk projects could be accepted when in fact they are good investment choices.
D)All of the choices could occur when using a single discount rate for all projects.

Question

Quizplus · Accepted Answer

All of the choices could occur when using a single discount rate for all projects. Assigning the same discount rate to all projects regardless of risk may result in the rejection of potentially profitable low-risk projects and the acceptance of unprofitable high-risk projects. It is important to recognize the risk associated with each project and adjust the discount rate accordingly to make an accurate evaluation.

If All Projects Are Assigned the Same Discount Rate for Purposes