The risk-adjusted discount rate approach to evaluating projects with unequal lives converts the net present value of unequal-lived, mutually exclusive projects into an equivalent annual amount.

Question

Quizplus · Accepted Answer

The risk-adjusted discount rate approach adjusts for risk by altering the discount rate used in NPV calculations, but it does not convert NPV into an equivalent annual amount. The equivalent annual annuity (EAA) method is used for that purpose.

The Risk-Adjusted Discount Rate Approach to Evaluating Projects with Unequal