If a firm is considering purchasing an asset whose beta is greater than the current beta of the firm, it should use a discount rate greater than the firm's average required rate of return to evaluate the possible investment.?
Answer the following statement true (T) or false (F)
True
Firms should expect more returns from risky projects. So, it should use a discount rate greater than the firm's average required rate of return for firms with greater beta risk. See 10-3: Incorporating Risk in Capital Budgeting Analysis
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