Use a risk-adjusted cost of capital against the good scenario above which can adjust for risk variables such as; experience with the focus of the project, chance of change to estimated variables (revenue, costs, timing, etc), and/or the potential change in the cost of capital in the future. 

Compute the new NPV using a variety of risk-adjusted discount rates. Justify your computations in determining how you have adjusted discount rates for risk. Discuss the outcomes from your adjustments and how you would apply them in capital expenditure justification.

Answer rating: 100% (QA)

When analyzing investments or projects for profitability cash flows are discounted to present value to ensure the true value of the undertaking is captured Typically the discount rate used in these ap... View the full answer