Which three of the following are drawbacks of the risk- adjusted discount rate method?
A) Risk perception is inevitably susceptible to personal bias.
B) There is a high level of arbitrariness in the selection of risk premiums.
C) Investors tend to consider risk of less importance than project managers.
D) It is extremely difficult to allocate projects to risk classes.

Question

Quizplus · Accepted Answer

A) Risk perception is a subjective matter and can vary from person to person, introducing personal bias into the analysis.
B) The selection of risk premiums can be arbitrary, leading to inconsistencies in the analysis.
C) This statement is not a drawback of the risk-adjusted discount rate method.
D) It can be difficult to allocate projects to risk classes accurately, which can affect the accuracy of the analysis.

Which Three of the Following Are Drawbacks of the Risk-