Relative Risk of a Proposed Project Is Best Accounted for by Which

question 37

Multiple Choice

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

• A)Adjusting the discount rate upward if the project is judged to have above-average risk.
• B)Adjusting the discount rate downward if the project is judged to have above-average risk.
• C)Reducing the NPV by 10% for risky projects.
• D)Picking a risk factor equal to the average discount rate.
• E)Ignoring risk because project risk cannot be measured accurately.

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Definitions:

Capital Cost Allowance (CCA)

A tax deduction that Canadian businesses can claim for the depreciation of tangible and intangible assets.

Manufacturing Equipment

Manufacturing equipment refers to the machinery and tools used in the process of producing goods or handling materials.

Labour And Materials

The costs associated with the workforce (labour) and the raw materials used in the production of goods and services.

Tax Rate

The percentage at which an individual or corporation is taxed by the government, varying based on income or profit levels.