If a company uses the same discount rate for evaluating all projects, which of the following results is likely?
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A. B. C. D. E.B
Under the risk-adjusted discount rate, differential project risk is dealt with by changing the discount rate. High-risk projects are discounted at a higher cost of capital; lower-risk projects are discounted at a rate below the firm's average cost of capital, etc. This approach incorporates project risk into capital budgeting.