The subjective approach to project analysis: a. Is used regardless of whether a firm has an all-equity capital structure or not. b. Does not use Firm X's WACC as the basis for the discount rate of Firm Y's projects. c. Assigns discount rates to projects at the discretion of senior management. d. Does not allow managers to arbitrarily adjust the discount rate after determining the project's beta. e. Does not necessarily apply a lower discount rate to equity-financed projects compared to those with partial debt financing.

c. Assigns discount rates to projects at the discretion of senior management.

The subjective approach to project analysis gives senior management the flexibility to set discount rates for individual projects based on their judgment and qualitative factors. This may include considerations such as the project's risk level, strategic importance, or alignment with the company's overall objectives. While there may be a base rate influenced by the company's weighted average cost of capital (WACC), management often has the discretion to adjust this rate to align with their view of the specific project's risk profile and other factors.

Extra: When analyzing projects, companies need to determine an appropriate discount rate to use in the net present value (NPV) calculations. The discount rate reflects the opportunity cost of capital and the risk associated with the project. There are several approaches to determining the discount rate:

1. **WACC (Weighted Average Cost of Capital)** - This is a common approach where the discount rate is based on the company's current cost of capital, which includes the cost of both debt and equity. The WACC is used as the hurdle rate for all projects. This approach assumes that the project's risk profile is similar to the average risk of the company's existing projects and operations.

2. **Subjective Approach** - Under this approach, senior management can adjust the discount rate based on their assessment of the project's risk, strategic value, and other subjective factors. This flexibility allows them to account for differences between the project's risk and the company's average risk.

3. **Project-specific Discount Rate** - Instead of using a standard WACC for all projects, some firms calculate a specific discount rate for each project, based on its unique risk characteristics. Such an approach may use the Capital Asset Pricing Model (CAPM) to determine a beta for the project and derive a more representative discount rate.

4. **Marginal Cost of Capital Schedule** - For firms with many potential projects and limited capital, a marginal cost of capital schedule can be used that reflects the increasing WACC for additional capital as more and more projects are taken on.

It's important for students to understand that the choice of discount rate has significant implications on the assessment of a project's viability. Choosing too high a rate may result in rejecting potentially profitable projects, while too low a rate might lead to accepting projects that don't cover their cost of capital, reducing shareholder value. The goal is to select a rate that accurately reflects the project's risk and the cost of capital involved so that the firm can make informed investment decisions.