The appropriate discount rate that analysts use in computing the present value of future cash flows is composed of a risk factor reflecting the riskiness of the project.Thus,

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All of the given options are true. The appropriate discount rate adjusts for the riskiness of the project, which means the higher the risk, the higher the discount rate. The government bodies usually have the lowest risk premiums because they are considered the safest investment options. Finally, the discount rate differs based on the level of risk of the project, for instance, a high-risk R&D project would have a higher discount rate than low-risk bonds.

The Appropriate Discount Rate That Analysts Use in Computing the Present