What Is a Certainty Equivalent?

The method of determining equivalence is to adjust the numerator of the net present value formula to determine the risk-free cash flow equivalent to the risky cash flow, and then use the risk-free interest rate discount to calculate the project's net present value as the basis for decision .

Deterministic equivalence

Right!

The method of determining equivalence is to adjust the numerator of the net present value formula to determine the risk-free cash flow equivalent to the risky cash flow, and then use the risk-free interest rate discount to calculate the project's net present value as the basis for decision .

Financial management terms.