Risk
The relative risk of a proposed project is best accounted for by which of the following procedures?
Answer
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Adjusting the discount rate upward if the project is judged to have above-average risk.
Adjusting the discount rate downward if the project is judged to have above-average risk.
Reducing the NPV by 10% for risky projects.
Picking a risk factor equal to the average discount rate.
Ignoring risk because project risk cannot be measured accurately.
