Question

When risks of a project or capital expense are higher than an alternate, it is reasonable...

When risks of a project or capital expense are higher than an alternate, it is reasonable to:

Raise the CCC % to account for the added risk and rerun the NPV’s for both

Not accept the Project/Capital Expense

Base the final decision solely on the qualitative analysis outcome.

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Answer #1

When risk of the project or capitalcapital expenditures are higher than the alternate then it is reasonable to adjust the the risk of the project by raising the discounting percentage for the added risk and rerun the the net present value analysis for both the projects.

Finding out net present value for both the project after adjustment of risk percentage will be providing a better picture of risk adjusted net present value method.

it is not better to reject the project or base The final decision solely on qualitative analysis.

Correct answer will be option (A ) raise the CCC%to account for the added risk and rerun the net present value analysis.

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