An organization's discount rate should be equal to or exceed the organization's cost of capital.

Question

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The organization's discount rate is the minimum rate of return required by the organization on its investments. Cost of capital, on the other hand, refers to the cost incurred by the organization to finance its operations. If the discount rate is less than the cost of capital, the organization will not generate enough returns on its investments to cover its cost of capital. Hence, the discount rate should be equal to or greater than the cost of capital to ensure profitability and sustainability of the organization.

An Organization's Discount Rate Should Be Equal to or Exceed