A company is considering a project in which the risk associated with annual cash flows varies considerably from year to year. Which of the following methods will best allow management to include consideration of risk in the analysis?
A)Pure play method
B)Accounting beta method
C)Certainty approach method
D)Overlay approach

Question

A company is considering a project in which the risk associated with annual cash flows varies considerably from year to year.  Which of the following methods will best allow management to include consideration of risk in the analysis?
A)Pure play method
B)Accounting beta method
C)Certainty approach method
D)Overlay approach

Quizplus · Accepted Answer

The certainty approach method adjusts the cash flows for risk by converting uncertain cash flows into certain equivalents, allowing management to consider risk in their analysis effectively.

A Company Is Considering a Project in Which the Risk