To Account for Risk an Alternative to Adjusting the Discount

question 47

True/False

To account for risk an alternative to adjusting the discount rate is the certainty equivalent which adjusts the cash flows.

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Definitions:

Accounting Profit

The total revenue of a business minus the explicit costs of operating, not including opportunity costs.

Implicit Costs

The opportunity costs that are not directly paid out but represent the loss of potential income from using resources in a certain way.

Opportunity Costs

Missing out on possible advantages from other choices by opting for a particular alternative.

Externalities

Spillover effects of an activity that influence the well-being of nonconsenting parties.