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The rate a firm should theoretically use when discounting for that measure is its:
ACost of carriage
BCost of custody
CCost of coverage
DCost of capital
Answer & Solution
Correct answer: D. Cost of capital
1. It is what the firm pays to attract funds.
2. In practice it is hard to estimate.
3. It is the cost of capital.
_Source: OpenStax Principles of Finance 2e, Chapter 16, How Companies Think about Investing._
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