Which of the Following Statements About the Risk-Adjusted Discount Rate

question 47

Multiple Choice

Which of the following statements about the risk-adjusted discount rate approach and the certainty equivalent approach to project evaluation is most correct?

• A)NPVs will differ under either method according to the 'risk adjustment factor'.
• B)NPVs should be the same under either approach.
• C)NPVs are generally higher using the 'risk-adjusted discount rate' approach.
• D)NPVs are generally lower using the 'risk-adjusted discount rate' approach.

---

Definitions:

Deposits in Transit

Funds that have been recorded by a company but not yet by its bank, often due to the timing of bank processing.

Days' Sales Uncollected

A financial metric measuring the average number of days it takes for a company to collect its receivables post-sale.

December 31

The last day of the calendar year, often used as the end date for annual financial reporting.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, showing the net worth and financial health of the business.