If a project could have a bad outcome A) the discount rate should be increased B)the market risk premium should be revised downward C)the beta should be increased D) expected cash flows should be adju...
If a project could have a bad outcome A) the discount rate should be increased B)the market risk premium should be revised downward C)the beta should be increased D) expected cash flows should be adjusted downward to reflect this possibility
Homework Answers
Please find below the solution... let me know if you need any clarification.
Correct answer is option : D) expected cash flows should be adjusted downward to reflect this possibility
If project has bad outcome than cash flow should be adjusted with the possible scenario, so that net present value will provide the correct view for decision making.
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If a project could have a bad outcome A) the discount rate should be increased B)the market risk premium should be revised downward C)the beta should be increased D) expected cash flows should be adju...
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