The discount rate that will result in the lowest net present value for a project is
A) any rate lower that the cost of capital.
B) any rate higher than the cost of capital.
C) the lowest rate used to evaluate the project.
D) the highest rate used to evaluate the project.

Question

Quizplus · Accepted Answer

The discount rate used to evaluate a project is typically the cost of capital or a similar rate that reflects the required return on investment for the company. Using a higher rate than the cost of capital will result in a lower net present value, but using a lower rate may overstate the value of the project. Therefore, the discount rate that will result in the lowest net present value for a project is the highest rate used to evaluate the project, which typically represents the company's hurdle rate or minimum required rate of return.

The Discount Rate That Will Result in the Lowest Net