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Certainty equivalent method For Risk And Uncertainty In Capital Budgeting

Certainty equivalent method For Risk And Uncertainty In Capital Budgeting:

finance
[Post Image Courtesy of JK1991 at FreeDigitalPhotos.net]

It is also another simplest method for calculating risk in capital budgeting. It reduces expected cash inflows by certain amounts it can be employed by multiplying the expected cash inflows by certainly equivalent co-efficient in order the uncertain cash inflow to certain cash inflows.

If the net present value of project A is more than that of project B, Project A should be preferred.

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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