Risk May Be Integrated into Capital Budgeting Decisions by

question 4

Multiple Choice

Risk may be integrated into capital budgeting decisions by

• A) adjusting the standard deviation of possible outcomes.
• B) determining the expected value.
• C) adjusting the discount rate.
• D) adjusting the time horizon.

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Definitions:

Earnings Rate

The return on an investment or the rate at which a company or asset generates income, typically expressed as a percentage.

Rate of Return

The profit or loss of an investment over a specified period, expressed as a percentage of the investment’s initial cost.

Present Value

The contemporary valuation of a future monetary sum or cash flow series, as determined by an agreed-upon rate of return.

Future Cash Flows

Estimated amounts of money expected to be received or paid out over future periods.