北京企业金融12.pdfVIP

Lecture 8 Risk, Cost of Capital, and Capital Budgeting • Our previous work on NPV allowed us to value riskless cash flows precisely. That is, we discount by the riskless interest rate. T C NPV C− + 0 ∑ i i (1 i 1 ) +r • However, because most real world cash flows in the future are risky, business demands a procedure for discounting risky cash flows. • This chapter applies the concept of net present value to risky cash flows. • For ris