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The proper discount rate to use in calculating certainty equivalent net present value is the ?

a. Risk adjusted discount rate b. Cost of capital c. Risk free rate d. Cost of equity capital

Feasibility Studies
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Question added by SREEDEVI SUNILKUMAR , Business finance officer , Emirates Airline
Date Posted: 2014/04/01
Upvote (1) Views (10) Followers (3) Answers (5) Report Question
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Shahbaz Hayder
by Shahbaz Hayder , Group Head of Finance , Sharif Group of Companies

If Company is not leveraged

 

Cost of capital will be used as discount rate

 

If Company is leveraged

 

Weighted Average Cost of Capital will be used as discount rate

Fairouz Asfour
by Fairouz Asfour , Executive , College of Banking and Financial Studies

The weight average cost of capital

Ali Bin Tariq
by Ali Bin Tariq , Sales Accountant , Nadec

B is the answer (Cost of Capital) including both equity & debt

Paolo Borchetta
by Paolo Borchetta , Managing Director , NIMM International Mauritanie Mining

WACC. Calculated for the specific market where the company is operating for factors like market risk premium, risk free rate, average equity beta of the sector's piers, etc.

Arwa Ayyash
by Arwa Ayyash , Business Analyst/ Consultant , Abu Dhabi National exhibition Company - ADNEC ( Tourism 365)

the right rate is the WACC ( weighted average cost of Capital ) 

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