Question

Risk in capital budgeting implies that the decision-maker knows _______ of the cash flows.

• A. Variability
• B. Probability
• C. Certainty
• D. None of the Above

Answer 1

The correct option is B Probability

Risk is the probability of damage, loss or threat. Risk in capital budgeting implies that the decision maker knows the probability of cash flows. The decision maker after analysing the risk will have of fair idea of the cash flows that might arise from the decision that is made.