Using the NPV method which factor is not relevant in determining the discount rate?

Question

Quizplus · Accepted Answer

The number of years the firm has been in business is not relevant in determining the discount rate. The relevant factors are the rate of inflation, risk, and opportunity cost. The rate of inflation affects the purchasing power of the cash flows, risk affects the uncertainty of the cash flows, and opportunity cost is the cost of not investing in the next best alternative.

Using the NPV Method Which Factor Is Not Relevant in Determining