When a Company Is Evaluating an Investment with Discounted Cash

question 63

True/False

When a company is evaluating an investment with discounted cash flows, if the investment has a higher risk, the company will use a lower discount rate, and vice versa.

---

Definitions:

Riskier

Characterized by or involving higher levels of risk; more uncertain or liable to result in adverse outcomes compared to alternatives.

Not-Invented-Here Bias

The tendency to ignore or harbor negative attitudes toward ideas from outside one’s own organization or project team.

Implement

To put into action or execute a plan, process, or instruction.

Expected Value

A statistical concept that calculates the anticipated value of an investment, decision, or outcome over time, considering all possible scenarios.