What component does not influence the market discount rate?

The market discount rate, often used in the context of valuing investments, is influenced by several factors, each playing a critical role in determining the expected return investors seek. The risk-free rate of return is a foundational aspect, representing the return on investment with no risk of financial loss, typically associated with government bonds. The risk premium reflects the additional return required by investors to compensate for the risks associated with a specific investment, above the risk-free rate. The constant growth rate can also impact valuations, particularly in models like the Gordon Growth Model, as it affects future cash flow expectations.

Tax incentives, however, do not directly influence the market discount rate. While tax policies can affect the overall investment climate and alter the attractiveness of certain investments, they are not a fundamental component of the discount rate itself. The market discount rate is primarily derived from the risk-free rate and the risks associated with an investment, making tax incentives more of a supplementary consideration rather than a direct contributor to the discount rate calculation. Thus, the correct response highlights that B does not align with the key elements that shape the market discount rate.