To avoid damaging its market value each company must use, Ask an Expert

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To avoid damaging its market value, each company must use the correct discount rate to evaluate its projects. This discussion describes a real example of a company that failed to recognize certain risks associated with its business operations.

Read the section “Ethics and the Cost of Capital” from your textbook (p. 475). Respond to the following:

• Compare and contrast the internal rate of return approach to the net present value approach to capital rationing. Which is better? Support your answer with well-reasoned arguments and examples.
• Is the ultimate goal of most companies—maximizing the wealth of the owners for whom the firm is being operated—ethical? Why or why not?
• Why might ethical companies benefit from a lower cost of capital than less ethical companies?

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Financial Management, Finance

Category:- Financial Management
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