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
CBK - Monetary Policy The money supply in the economy has a main effect on both the rate of inflation and the level of economic activity. The level of money supply is controll

Determine how much of a total loan payment applies towards principal and how much applies towards interest for a home mortgage of $177,219 with a fixed APR of 7.5% of 20 years

Assignment Gary and Beth have accepted the asset allocation that you have given them, but are now looking to you to give them some advice on what stocks they should purchase. R

Acceptance Rule of IRR IRR will accept a venture if its IRR is higher than or equivalent to the minimum required rate of return such is usually the cost of finance also recogn

Price Earnings Ratio Valuation P/E ratio is traditionally employed for valuation of shares however it is an important ratio in the valuation of business. The P/E ratio is the

Comparison between Modern and Traditional Methods Both modern and traditional methods will indicate or show strong weaknesses which like a company cannot use either to choose

Write short notes on the following: a) Performance budgeting b) Zero base budgeting c) Factors affecting dividend decisions d) Accrual concept

Illustrates the roles of money? Roles of Money: a. A medium of exchange An asset which individuals obtain for the intention of trading quite than for their own consump

Question 1: a) What is dependency ratio and why is it important for pensions? b) For which types of schemes is dependency ratio mostly relevant? Explain c) What is the

Ask question #Minimum what are the challenges that a finance manager may face?