The Relative Risk of a Proposed Project Is Best Accounted

question 5

Multiple Choice

The 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:

Construct Validity

The extent to which a test measures what it claims to measure, assessing the accuracy of an instrument or experiment.

Conceptual Replication

The process of conducting a study with different methods or measures than the original to validate the same underlying concept or hypothesis.

Direct Replication

The process of conducting a study with the same methodology and under the same conditions as a previous study to verify its results.

Meta-analysis

is a statistical technique that combines the results of multiple scientific studies to arrive at a comprehensive conclusion.