Risk adjusted discounting rate – methods of computing cost, Finance Basics

Risk Adjusted Discounting Rate - Methods of Computing Cost of Capital

This method is used to establish the discounting rate to be used for a provided project. The cost of capital of the firm will be utilized as the discounting rate for a given project whether project risk is equal to business risk of the firm. If a project has a higher risk than the business risk of the firm, then a percentage risk premium is further added to the cost of capital to verifying the discounting rate that is discounting rate for a high risk project = cost of capital + percentage risk premium. Consequently a high risk project such will be evaluated at a higher discounting rate.

Posted Date: 1/30/2013 4:06:00 AM | Location : United States







Related Discussions:- Risk adjusted discounting rate – methods of computing cost, Assignment Help, Ask Question on Risk adjusted discounting rate – methods of computing cost, Get Answer, Expert's Help, Risk adjusted discounting rate – methods of computing cost Discussions

Write discussion on Risk adjusted discounting rate – methods of computing cost
Your posts are moderated
Related Questions
I am facing some problems in my assignment of Performance Review in finance. Can anybody suggest me the proper explanation for it?

Acceptance Rule of Accounting Rate of Return or ARR ARR procedure will accept those projects whose ARR is higher rather than that set with management or with bank rate and it

The Morris Corporation has $ 600,000 of debt outstanding, and it pays an interest rate of 8% annually. Morris’s annual sales are $# million, its average tax rate is 40% and its net

Company XYZ stock is considering the two new projects, Project A and Project B. The two projects have similar risk characteristics as the existing business. The managers forecast t

Question: A non-zero coupon bond carries a coupon rate of 8 percent and has 9 years until maturity. It sells at a yield to maturity of 6 percent. The par value of the bond is

Limitations of Middle Asia Stock Exchange Index 1. The twenty (20) company's sample whose share prices are utilized to calculate the index are not true representatives. 2.

Opportunity Cost or Residual Loss It is the cost due to the failure of both parties to act optimally like as in example of A. Lost opportunities because of incapability to

Advantage of Bill - Source of Finance Advantages of necessitating a Bill as a Source of Finance They are a faster means of raising finance whether drawer is credible.

The financial data is of little value in its raw form. However, the same may be analyzed and be put in the form more meaningful to the recipients. This is normally done by using va

Executive Share Options Plans In a share option format, selected staff can be provided a number of share alternatives, each of which that provides the holder the right after a