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Question
Which of the following procedures best accounts for the relative risk of a proposed project?a. Adjusting the discount rate downward if the project is judged to have above-average risk.
b. Reducing the NPV by 10% for risky projects.
c. Picking a risk factor equal to the average discount rate.
d. Ignoring risk because project risk cannot be measured accurately.
e. Adjusting the discount rate upward if the project is judged to have above-average risk.
Answer
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