The use of risk-adjusted discount rates is based on the concept that investors require a higher rate of return for more risky projects.

Question

Quizplus · Accepted Answer

This statement is true. The riskier the project, the higher the risk-adjusted discount rate investors will require in order to compensate for the increased risk. The use of risk-adjusted discount rates is a common practice in financial analysis and is intended to provide a more accurate estimate of the true value of a project or investment.

The Use of Risk-Adjusted Discount Rates Is Based on the Concept