Show the disadvantages of adjusted discount rate, Financial Management

Assignment Help:

Q. Show the Disadvantages of adjusted discount rate?

(1) The risk premium rates resolute under this method are arbitrary. Therefore this method mayn't give objective results.

(2) In this method the risk is compounded over time since the risk premium is added to the discount rate. Which signifies this method presumes that risk necessarily increases with the passage of time? However this may not happen in all situations or cases.

(3) This method assumes that investors are averse to risk I that is investors avoid facing risk). This mayn't be true in all cases. There are several investors who would like to take risk and are prepared to pay premium for taking risk.


Related Discussions:- Show the disadvantages of adjusted discount rate

What is rectification of errors, Principles of Financial Accounting and Man...

Principles of Financial Accounting and Management 1. Define Accounting. Briefly explain the ‘Entity Concept' and ‘Money Measurement Concept' of accounting. 2. What is rectif

Certified public accountant, Certified Public Accountant (CPA) - ACCOUNTANT...

Certified Public Accountant (CPA) - ACCOUNTANT who has satisfied education, experience and examination requirements of her or his jurisdiction essential to be certified as a public

Describe market value weights, Q. Describe Market Value Weights? Market...

Q. Describe Market Value Weights? Market Value Weights: - As per market worth scheme of weighting the weights to dissimilar sources of finance are assigned on the basis of thei

Calculate the risk premium and probabilities , Johnson & Johnson (JNJ) is t...

Johnson & Johnson (JNJ) is trading at 68.15 (Sep 12th 2012 close). JNJ is a large health care conglomerate. It has done well so far this year (though not as well as the market) and

Operating cycle, #questionoperating cycle in vegetable growing business in ...

#questionoperating cycle in vegetable growing business in uganda..

Write a note on underwriting, Question 1 Explain the components of Indian ...

Question 1 Explain the components of Indian Financial System Question 2 Write a short note on Primary and Secondary markets Question 3 Explain the Investment optio

Equity, how do we measure equity in an orgarnisation

how do we measure equity in an orgarnisation

Explain discounted cash flow analysis, Discounted cash flow analysis is th...

Discounted cash flow analysis is the term employ to describe the technique whereby the value of future cash flows is discounted back to a present value so that the monetary values

Types and causes of unemployment, Question 1: (a) Discuss the main limi...

Question 1: (a) Discuss the main limitations of using changes in national income as an index of economic welfare. (b) What are the alternatives measures and issues that sho

Accounting framework, Accounting Framework The rules and conventions o...

Accounting Framework The rules and conventions of accounting are generally referred to as the conceptual framework of accounting.  As already elaborates in the previous sectio

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd