What Is 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.