In a capital budgeting context, risk is the chance that a project will prove unacceptable or, more formally, the degree of variability of cash flows.

Question

Quizplus · Accepted Answer

Risk in capital budgeting refers to the possibility that the actual outcome of a project will be different from what was expected, which can result in financial losses or reduced returns. This risk is usually measured in terms of the degree of variability of cash flows, which reflects the uncertainty of future cash inflows and outflows associated with a project. Therefore, option A is correct, as it accurately describes the concept of risk in capital budgeting.

In a Capital Budgeting Context, Risk Is the Chance That