If the company cost of capital is 20% and a proposed project's cost of capital is 15%,then discounting the projects' cash flows at 20% would:
A) determine where the project plots in relation to the security market line.
B) make the project look more attractive than it should be.
C) be correct from a theoretical perspective.
D) be incorrect and could cause the project to be erroneously rejected.

Question

Quizplus · Accepted Answer

Discounting the project's cash flows at a higher rate than its cost of capital would undervalue the project's potential returns, leading to a possible rejection of a project that is actually viable.

If the Company Cost of Capital Is 20% and a Proposed