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2 November, 08:20

The subjective approach to project analysis:

a. is used only when a firm has an all-equity capital structure.

b. uses the WACC of firm X as the basis for the discount rate for a project under consideration by firm Y.

c. assigns discount rates to projects based on the discretion of the senior managers of a firm.

d. allows managers to randomly adjust the discount rate assigned to a project once the project's beta has been determined.

e. applies a lower discount rate to projects that are financed totally with equity as compared to those that are partially financed with debt.

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Answers (2)
  1. 2 November, 08:33
    0
    Assigns discount rates to projects based on the discretion of the senior managers of a firm (C)

    Explanation:

    The subjective approach to project analysis allows for a discounted rate to be assigned to projects that are financed using a debt free method (equity) of the company. although the discount is always applied to the project at the discretion of the senior management employees/managers of the firm.

    projects financed using loans or other form of debit inclined financing cannot be approved for discounts by the senior managers of the firms because the project is debt inclined hence subjective approach cannot be applied to it.
  2. 2 November, 08:40
    0
    The correct answer is C "Assigns discount rates to projects based on the discretion of the senior managers of a firm".

    Explanation:

    The abstract way to deal with venture examination doles out rebate rates to ventures dependent on the carefulness of the ranking directors of a firm. The senior supervisory group assumes the most significant job in choose the markdown rate in the undertaking.
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Home » Business » The subjective approach to project analysis: a. is used only when a firm has an all-equity capital structure. b. uses the WACC of firm X as the basis for the discount rate for a project under consideration by firm Y. c.
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