In the riskadjusted discount rate approach, the cash flows for each project are discounted at the:
A) risk-free rate
B) cost of capital
C) risk-adjusted discount rate
D) certainty-equivalent rate
E) none of the above

Question

Quizplus · Accepted Answer

The risk-adjusted discount rate approach involves adjusting the discount rate according to the risk level of the cash flows. This means that the cash flows of each project are discounted at a rate that reflects their specific risk, which is the risk-adjusted discount rate.

In the Riskadjusted Discount Rate Approach, the Cash Flows for Each