In Present Value Analysis,most Companies Require a Rate of Return

question 17

True/False

In present value analysis,most companies require a rate of return that is higher than the discount rate because of the degree of risk in any project compared with investing in a bond.

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Definitions:

Random Experiment

An experiment or process that leads to uncertain outcomes, each with definable probabilities.

Binomial Distribution

A probability distribution that summarizes the likelihood that a value will take one of two independent states across a series of experiments or trials.

Expected Value

The sum of all possible values each multiplied by the probability of its occurrence, often used in probability theory to predict the average outcome of a random event over the long term.

Binomial Probability Distribution

A probability distribution that summarizes the likelihood that a value will take one of two independent states under a given number of observations or trials.