Risk
The relative risk of a proposed project is best accounted for by which of the following procedures?
Answer
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.