Using the risk-adjusted discount rate approach, projects with high coefficients of variation will have ________ net present values than projects with low coefficients of variation and similar cash flows.

Question

Quizplus · Accepted Answer

A high V represents greater risk. Greater risk results in a higher expected rate of return, which will be used to discount future cash inflows. The higher the discount rate, the smaller the present value.

Using the Risk-Adjusted Discount Rate Approach, Projects with High Coefficients