The correct statement about the discount rate when using NPV to evaluate a project is that it's determined by management and can change depending on the type of project Option 1.
When using Net Present Value (NPV) to evaluate a project, the correct statement concerning the discount (hurdle) rate is that it's determined by management and can change depending on the type of project. This means that different projects may have different discount rates based on their risk level and required return on investment. The discount rate is used to calculate the present value of future cash flows, and a higher discount rate indicates a higher required return and lower present value.
Complete Question :
When using Net present value (NPV) to evaluate a project, which of the following statements concerning the discount (hurdle) rate would be considered correct?
1) It's determined by management and can change depending on the type of project
2) If two projects are compared and both have a positive NPV, the one with the higher NPV is selected
3) The discount rate is always set at 20% per the test book example
4) Strategic projects always have a low hurdle rate