Question

Risk in Capital budgeting implies _____________.

• A. Uncertainty of Cash flows
• B. Probability of Cash flows
• C. Certainty of Cash flows
• D. Variability of Cash flows

Answer 1

Answer: (A)

Uncertainty of Cash flows

Risk is the probability of damage, loss or threat. Risk in capital budgeting implies that the decision maker knows the probability of cash flows. Therefore, risk in capital budgeting means uncertainty of cash flows.