If the risk of an investment project is different than the firm's risk then:
A) you must adjust the discount rate for the project based on the firm's risk.
B) you must adjust the discount rate for the project based on the project risk.
C) you must exercise risk aversion and use the market rate.
D) an average rate across prior projects is acceptable because estimates contain errors.
E) one must have the actual data to determine any differences in the calculations.
Correct Answer:
Verified
Q14: The best fit line of a pairwise
Q15: Beta is useful in the calculation of
Q16: The weighted average cost of capital for
Q17: The present value of cash flows is
Q18: If the project beta and IRR coordinates
Q20: Regression analysis can be used to estimate:
A)
Q21: Firms whose revenues are strongly cyclical and
Q22: An industry is likely to have a
Q23: The CAPM:
A) explicitly adjusts for risk.
B) applies
Q24: Terminal value of a firm is also
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents