The ________ reflects the return that must be earned on the given project to compensate the firm's owners adequately according to the project's variability of cash flows.
A) internal rate of return
B) cost of capital
C) risk-adjusted discount rate
D) average rate of return

Question

Quizplus · Accepted Answer

The risk-adjusted discount rate takes into account the variability of cash flows and adjusts the discount rate accordingly. It is a more accurate reflection of the required return for a project than the cost of capital or average rate of return. The internal rate of return is the rate at which the net present value of a project equals zero, and does not necessarily take into account the variability of cash flows.

The ________ Reflects the Return That Must Be Earned on the Given