Risk AnalysisII - Project Management A Managerial Approach...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Project Management A Managerial Approach Risk Analysis RISK ADJUSTED DISCOUNT RATE The risk adjusted discount rate method calls for adjusting the discount rate to reflect the project risk. If the risk of the project is equal to the risk of the existing investments of the firm, the discount rate used is the average cost of capital of the firm. If the risk of the project is greater than the risk of the existing investments of the firm, the discount rate used is higher than the average cost of capital of the firm. Finally if the risk of the project is less than the risk of the existing investments of the firm, the discount rate used is less than the average cost of capital of the firm. Risk adjusted discount rate is- k k d n i r + + = where k r =risk adjusted discount rate i= risk free rate of interest n= adjustment for the firms normal risk =adjustment for the differential risk of the project k d I r A N P V n t k t- + = = 1...
View Full Document

This note was uploaded on 04/20/2010 for the course PD 103 taught by Professor Mc during the Spring '10 term at Jaypee University IT.

Page1 / 14

Risk AnalysisII - Project Management A Managerial Approach...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online