If the Risk of an Investment Project Is Different Than

question 11

Multiple Choice

If the risk of an investment project is different than the firm's risk then:

• A) you must adjust the discount rate for the project based on the firm's risk.
• B) you must adjust the discount rate for the project based on the project risk.
• C) you must exercise risk aversion and use the market rate.
• D) an average rate across prior projects is acceptable because estimates contain errors.
• E) one must have the actual data to determine any differences in the calculations.

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