Projects that have ________ are often rejected by traditional discounted cash flow models of capital budgeting.

Question

Quizplus · Accepted Answer

All of the above factors (long lives, cash flow returns in later years, and high risk levels) can make projects appear less attractive when using traditional discounted cash flow models of capital budgeting. Long-lived projects result in a significant portion of cash flows occurring at the end of the project's timeline, leading to a lower net present value. Similarly, projects with cash flow returns in later years may have a lower present value when discounted to the present day. High-risk projects may have a discount rate that is too high, making the net present value less attractive. Thus, projects with these characteristics may be rejected by traditional DCF models.

Projects That Have ________ Are Often Rejected by Traditional Discounted