A particular project might have very uncertain cash flows, hence a highly uncertain NPV and IRR, yet it may not have high market risk.

Question

Quizplus · Accepted Answer

Market risk refers to the risk of the project's cash flows being affected by changes in overall market conditions such as interest rates, inflation, and economic events. Uncertainty in cash flows does not necessarily indicate high market risk as the project may be impacted by other factors such as industry-specific factors or company-specific factors. NPV and IRR measure the risk of the project's cash flows and are not directly related to market risk.

A Particular Project Might Have Very Uncertain Cash Flows, Hence