Which two methods do firms have for allowing for different levels of risk?
A) Raising the discount rate
B) Lowering the discount rate
C) Issuing bonds
D) Issuing more shares

Question

Quizplus · Accepted Answer

Firms can allow for different levels of risk by adjusting the discount rate used to calculate the present value of future cash flows. If the firm wants to account for a higher level of risk, they can raise the discount rate. Alternatively, if they want to account for a lower level of risk, they can lower the discount rate. Issuing bonds or shares are methods for raising capital, but do not directly relate to allowing for different levels of risk.

Which Two Methods Do Firms Have for Allowing for Different