If a Project's Only Risk Is Diversifiable

question 24

Multiple Choice

If a project's only risk is diversifiable,

• A) only half the risk premium should be added to the discount rate.
• B) only half the risk premium should be subtracted from the discount rate.
• C) the risk premium should be added to the discount rate.
• D) the risk premium should be subtracted from the discount rate.
• E) no risk premium should be attached to the discount rate.

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Definitions:

Accounting Cycle

The process of recording and processing all financial transactions of a company, from when the transaction occurs, to its representation on the financial statements, followed by closing the accounts.

Financial Statements

Financial statements are formal records that outline the financial activities and position of a business, person, or entity. These include income statements, balance sheets, and statements of cash flows.

Working Paper

A document that records the evidence, processes, and reasoning behind an accountant's audit or financial analysis.

Income Statement Columns

The structured classification of financial data in the income statement, typically involving revenues, expenses, and net income or loss.