Which of the following adjustment techniques would be preferred to account for additional project risk?
A)increase the discount rate.
B)adjust expected cash flows downward.
C)increase the beta.
D)adjust the market risk premium.

Question

Quizplus · Accepted Answer

Adjusting expected cash flows downward is the best choice as it directly accounts for additional project risk by reducing expected future cash inflows. Increasing the discount rate or beta, or adjusting the market risk premium may also be appropriate adjustments for risk, but they do not directly account for changes in the project's expected cash flows.

Which of the Following Adjustment Techniques Would Be Preferred to Account