Which of the Following Adjustment Techniques Would Be Preferred to Account

question 113

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:

Elemental Analysis

Elemental analysis is a process by which the composition of chemical substances is determined, identifying the quantity of each element within a compound.

Acid/Base Reaction

A chemical reaction that involves the transfer of hydrogen ions (H+) between a proton donor (acid) and a proton acceptor (base).

Conjugate Acid

The species created when a base gains a proton (H+), forming a pair in which the acid and base differ only by one hydrogen atom.

Conjugate Base

A species formed by the removal of a proton (H+) from an acid.