The discount factor used to appraise capital investment decisions is a measure of
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Alternative cost.
Capital investment appraisal decisions are the decisions about the amount to be spent on assets or investment to be made in assets. when taking these decisions we calculate the total initial cost of the assets, then analyze and compare it with the total financial benefits we can get from that asset. It helps us to make investment decisions for assets and figure out whether the asset is worth the money or not. The alternative cost here is the amount the business will have to lose for investing in an alternative asset. The discount factor asked in the question is a measure of the same alternative cost.
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