When using the risk-adjusted discount rate method,a manager increases the rate used for discounting future cash inflows.

Question

Quizplus · Accepted Answer

The risk-adjusted discount rate method involves adjusting the discount rate based on the level of risk associated with the investment. A higher level of risk will result in a higher discount rate being applied to account for the uncertainty of future cash inflows. Therefore, a manager will increase the rate used for discounting future cash inflows when using the risk-adjusted discount rate method.

When Using the Risk-Adjusted Discount Rate Method,a Manager Increases the Rate