Which of the Following Is a Common Adjustment to Net

question 7

Multiple Choice

Which of the following is a common adjustment to net present value models to incorporate risks inherent in an investment project?

• A)The discount rate used in the analysis can be increased.
• B)The payback period can be increased.
• C)A lower discount rate can be used.
• D)Risk is never considered in a model since it can not be quantified.

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Definitions:

Period Costs

Costs that are expensed in the period in which they are incurred, not directly associated with production, such as selling and administrative expenses.

Balance Sheet

A financial statement that presents a company's financial position at a specific point in time, showing assets, liabilities, and shareholders' equity.

Income Statement

A financial statement that shows a company's revenue, expenses, and profit over a particular period, providing insight into its financial performance.

Fixed Costs

Fixed Costs are expenses that do not change with the level of production or sales, such as rent or salaries.