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Boundless Finance
The Role of Risk in Capital Budgeting
Finance Textbooks Boundless Finance The Role of Risk in Capital Budgeting
Finance Textbooks Boundless Finance
Finance Textbooks
Finance

Section 5

Factors Impacting Capital Budgeting

Book Version 3
By Boundless
Boundless Finance
Finance
by Boundless
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2 concepts
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Risk Adjusting the Discount Rate

Discount rates are adjusted on an investment to investment basis, as different investments encounter different degrees of risk that must be considered when determining equitable returns.

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Risk Adjusting for the Time Horizon

A longer time horizon usually requires a higher return, due to increased price volatility and uncertainty relating to possible outcomes.

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