Question

The correct discount rate on a project ______ the expected return on a financial asset of comparable risk.

a) Exceeds
b) Equals
c) Falls short of
d) Fluctuates around

Answer 1

The correct discount rate on a project falls short of the expected return on a financial asset of comparable risk.

Step-by-step explanation:

The correct discount rate on a project falls short of the expected return on a financial asset of comparable risk.

A discount rate is the rate of return used to discount future cash flows back to their present value. It represents the opportunity cost of investing capital in a particular project or investment.

For a project to be financially viable, the expected return on the project should exceed the discount rate, indicating that it is expected to generate returns that compensate for the risk taken.