key factors executives consider when choosing a discount rate to apply to forecasted cash flows.

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Irving HeathcoteLv2

4 Feb 2019

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10-9:
Look back to the cash flows for projects F and G in 5-3. The costof capital was assumed to be 10%. Assume that the forecasted cashflows for projects of this type are over-stated by 8% on average.That is, the forecasted for each cash flow from each project shouldbe reduced by 8%. But a lazy financial manager, unwilling to takethe time to argue with the projectâs sponsors, instructs them touse a discount rate of 18%.
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fuchsiaworm905

There are several accepted methods of determining the monetary advantage of one investment opportunity over another: The payback method; zero discount rate; net present value; internal rate of return; modified internal rate of return; etc. Discuss one or more non-monetary factors that may influence a manager's otherwise objective decision in choosing one criterion over another. Also, which method do you consider the best?