What Rate of Return Should Be Used to Compute the NPV

Multiple Choice

What rate of return should be used to compute the NPV of a proposed purchase of Smiley's,an operating business?

A) A discount rate equal to Smiley's current return on equity
B) The discount rate applicable to other investments with similar risks
C) A discount rate equal to Smiley's net profit percentage
D) The rate of interest charged by a bank for a loan similar in size to the cost of the purchase
E) A discount rate that makes the NPV of the proposed purchase positive