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Accept reject Decision

Accept reject Decision The Risk-adjusted Discount Rate Approach can be used with both the NPV and the IRR. If the NPV method is used to evaluate capital expenditure decision. NPV would be calculated using the risk-adjusted rate. If the NPV is positive the proposal...

RISK EVALUATION APPROACHES

RISK EVALUATION APPROACHES Once the nature of risk is understood and its quantum estimated, it is to be incorporated within the decision making framework. This section examines the popular techniques to handle risk. They are: 1. Risk-adjusted Discount Rate Approach 2....

SIMULATION

SIMULATION Simulation is a statistical technique employed to have an insight into risk in a capital budgeting decisions, This technique applies predetermined probability distributions and random numbers to estimate risky outcomes. A simulation model is akin to...