Which of the Following Adjustment Techniques Would Be Preferred to Account

question 14

Multiple Choice

Which of the following adjustment techniques would be preferred to account for additional project risk?

• A)increase the discount rate.
• B)adjust expected cash flows downward.
• C)increase the beta.
• D)adjust the market risk premium.

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Definitions:

Estimated Regression

The process of using statistical methods to predict the value of a dependent variable based on the values of one or more independent variables.

Observations

The act of recording occurrences, behaviors, or phenomena often used as data for scientific research or studies.

Multiple Regression

A mathematical method that establishes the connection between a dependent variable and multiple independent variables through the application of a linear equation to the collected data.

Estimated Form

A representation of a model or function based on estimated parameters or coefficients.