Suppose you are valuing a future stream of high-risk (high-beta) cash outflows. High risk means a high
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Suppose you are valuing a future stream of high-risk (high-beta) cash outflows. High risk means a high discount rate. But the higher the discount rate, the less the present value. This seems to say that the higher the risk of cash outflows, the less you should worry about them! Can that be right? Should the sign of the cash flow affect the appropriate discount rate? Explain.
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Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
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