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The cost of capital is used as a discount rate because: Multiple Choice it is an indication of how much the firm is earning overall.

The cost of capital is used as a discount rate because:

Multiple Choice

it is an indication of how much the firm is earning overall.
if the cost of capital is earned, the common stock value of the firm will be maintained.
it is comparable to the prevailing market interest rates.
returns below the cost of capital will cover all fixed costs associated with capital and provide an excess return to shareholders.

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