Which of the following statements is false? A. The certainty equivalent method r

Question

Which of the following statements is false? A. The certainty equivalent method results in a lower net present value for a risky project. B. The risk-adjusted discount rate leaves cash flows at their expected value and adjusts the discount rate downward to compensate for additional risk. C. The certainty equivalent penalizes or adjusts downward the value of the expected annual free cash flows of a project. D. The risk-adjusted discount rate leaves cash flows at their expected value and adjusts the discount rate upward to compensate for additional risk.

Explanation / Answer

Answer: B. The risk-adjusted discount rate leaves cash flows at their expected value and adjusts the discount rate downward to compensate for additional risk.

Because The risk-adjusted discount rate leaves cash flows at their expected value and adjusts the discount rate upward to compensate for additional risk.

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