Please guys i need the sure answer of this question. I got three different answe
ID: 2719243 • Letter: P
Question
Please guys i need the sure answer of this question. I got three different answers for this question from different tutor. This is very Important. Please i need the write choice. Thanks.
1) If a company uses the same discount rate to evaluate all projects,
A) it will become riskier over time, and its value will decline.
B )it will become riskier over time, and its value will rise.
C) it will become less risky over time, and its value will rise.
D )it will become less risky over time, and its value will decline.
E) there is no reason to expect its risk position or value to change.
Explanation / Answer
1) If a company uses the same discount rate to evaluate all projects,
A) it will become riskier over time, and its value will decline.
Note :
If same discount rate is being evaluated over all projects than there is high probability of accepting poor high risk project and rejecting good low risk project and which would result in decline in value and As the chances are higher than there is high risk over the time