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Is it necessary to actually adjust for risk? Isn't awareness of risk in cash flows sufficient?

Is it necessary to actually adjust for risk? Isn't awareness of risk in cash flows sufficient? Explain

Top Answer

Yes I agree that enactment of a risk adjustment program is crucial. I base my argument by giving example of healthcare... View the full answer

8 comments
  • I am expecting answer in context of cash flows
    • bilalirshad
    • Jun 01, 2018 at 8:18am
  • Okay. I have noted.
    • profJere
    • Jun 01, 2018 at 8:20am
  • Kindly give me in reference to cash flow and how it could help in managing risk and return
    • bilalirshad
    • Jun 01, 2018 at 8:22am
  • I want answer in context of https://www.coursehero.com/file/23210712/10463548-Risk-and-Returns-in-Capital-Budgeting/
    • bilalirshad
    • Jun 01, 2018 at 8:24am
  • It is good to adjust your investment risk in as far as capital budgeting is concern. Awareness in cash flows entails being certain on the risk profile and investment return is known. Therefore, this awareness is not enough, the risk adjust is crucial because it allows you to measure the extent to which the risk is involved i.e. knowing how much the risk will be in order to get that required return from the investment. We must note that being certain on the estimated involved will enable to make a decision on whether to accept or reject the investment. If accepted, the adjusted risk will provide significant avenues of managing the risk that will be involved. Also, risk adjustment helps in comparing expected investment returns from various classes of portfolios. It simply helps to compare the return against the risk involved.
    • profJere
    • Jun 01, 2018 at 8:57am
  • What if the overseas cash flow are more variable than the firm average risk, how might that information be used to adjust for such risk?
    • bilalirshad
    • Jun 01, 2018 at 9:19am
  • Thank you student.
    • profJere
    • Jun 01, 2018 at 9:23am
  • What if the overseas cash flow are more variable than the firm average risk, how might that information be used to adjust for such risk?
    • bilalirshad
    • Jun 01, 2018 at 9:27am

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