Asked by
Rachel Nicole
on Nov 07, 2024
Verified
A firm that uses its WACC as a cutoff without considering project risk tends to accept negative NPV projects over time.
Negative NPV
A situation where the present value of future cash flows of an investment is less than the initial investment cost, indicating a potential loss.
Project Risk
The potential for loss or failure associated with an investment or business initiative.
- Understand the significance of accounting for project risk in investment evaluations.
Verified Answer
AB
Learning Objectives
- Understand the significance of accounting for project risk in investment evaluations.