The risk-adjusted discount rate is the rate of return that a project must earn to maintain or improve the firm's share price.

Question

Quizplus · Accepted Answer

The risk-adjusted discount rate (RADR) is the rate of return that a project must earn to compensate for the level of risk associated with the investment opportunity. It takes into account the risk-free rate of return, the level of risk associated with the project, and the market risk premium. The RADR is used to evaluate the viability of investment opportunities and to determine the minimum required rate of return that a project must earn to maintain or improve the firm's share price. Therefore, the statement is true.

The Risk-Adjusted Discount Rate Is the Rate of Return That