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
Enumerate about the Redemption Yield or Yield to Maturity (YTM) Redemption yield is indicated or promised rate of return an investor would receive from a bond purchased at t

Marbela Corporation's stock had a required return of 12.75% last year, when the risk-free rate was 6.4% and the market risk premium was 5.5%.  Now suppose the market risk premium d

Profitability Ratio These ratios signify the performance of the firm in relation to its capability to derive returns or profit from investment or from sale of goods that is pr

1. Find the price of the following bonds. They are all risk-free, and the risk-free rate is 10%. (a) A fifteen-year zero coupon bond with face value $1,000. (b) A three year

The Beta of several industry sectors is shown below. Industry                                                                                            Beta (β) Banks

A bondholder buys a bond maturing in two years for Rs. 120 and earns Rs.15 per annum as interest. His YTM is ______ %.

Based on the example in Lesson 2, compute your quarterly interest for three years if you deposit $500 at 8 percent, compounded quarterly. Remember to divide the 8 percent by 4 to g

system integration and infrastructure development is the


If you inherited $ 45,000 today and invested all of it in a security that paid a 7 percent rate of return, how much would you have in 25 years?