Adjusts the required rate of return at which the analyst discounts a project's cash flows based on the project's risk.
A) IRR
B) MIRR
C) Adjusted IRR
D) RADR

Question

Quizplus · Accepted Answer

RADR (Risk-Adjusted Discount Rate) is the method used to adjust the required rate of return based on the project's risk. This is because projects with higher risks would require a higher rate of return to compensate for the higher chance of failure or the greater uncertainty in cash flows. Therefore, D is the best choice among the given options. IRR (Internal Rate of Return) and MIRR (Modified Internal Rate of Return) are methods used to measure the profitability of a project, but they do not take into account the project's risk. Adjusted IRR is not a commonly used term in finance.

Adjusts the Required Rate of Return at Which the Analyst