Question & Answer: Which of the following statements about discount rates is true?…..

Which of the following statements about discount rates is true?

a. The higher the marginal tax rate, the higher the discount rate for future cash flows should be.

b. The higher the degree of risk involved in a transaction, the higher the discount rate for future cash flows should be.

c. The longer the time period over which a transaction will generate cash flows, the higher the discount rate should be.

d. The greater the amount of cash generated by a transaction, the higher the discount rate should be.