In a capital budgeting context, risk refers to

Question

Quizplus · Accepted Answer

Risk in capital budgeting refers to both the chance that a project will prove unacceptable (option A) as well as the degree of variability of cash flows (option B). A project may have an uncertain outcome, and risk may stem from factors such as market conditions, competition, or technological change. The variability of cash flows determines the level of risk associated with an investment, as it influences the project's ability to generate the expected return. Therefore, both options A and B are correct, making choice D the appropriate answer.

In a Capital Budgeting Context, Risk Refers to