The historical discount rate of the firm may be a good indicator of the appropriate discount rate to apply to the firm in the future,when all of the following conditions hold true except:
A) The current risk of the firm is the same as the expected future risk of the firm.
B) Expected future interest rates are likely to equal current interest rates.
C) The existing capital structure of the firm is the same as the expected future capital structure of the firm.
D) The current mix of debt and equity financing is equal.

Question

Quizplus · Accepted Answer

The current mix of debt and equity financing being equal does not necessarily ensure that the historical discount rate will be appropriate for the future, as it does not directly relate to the risk or interest rate conditions.

The Historical Discount Rate of the Firm May Be a Good