Define risk adjusted discount rate enhance capital budgeting, Financial Management

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Explain how using a risk-adjusted discount rate enhances capital budgeting decision making compared to by using a single discount rate for all projects?

The risk-adjusted discount rate enhances capital budgeting decision making as compared to the single discount rate approach as the RADR permits us to set a higher hurdle for the high risk project and a lower hurdle for the low risk project so aligning our capital budgeting decision making process very much closely with the goal of maximizing the value of the firm.


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