Question

In: Finance

Normally the appropriate discount rate for new products should be roughly the same as that for...

Normally the appropriate discount rate for new products should be roughly the same as that for cost improvement with known technology.

True or false?

Solutions

Expert Solution

The discount rate for new products should be significantly higher than the cost for improvement with known technology, since new products are highly prone to failure, which is what makes them risky.

Hence they deserve a higher discount rate and the correct answer is False

jeff jeffy answered 2 years ago
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