ECONOMICS

Detailed explanation-1: -A risk-adjusted discount rate is the rate obtained by combining an expected risk premium with the risk-free rate during the calculation of the present value of a risky investment. A risky investment is an investment such as real estate or a business venture that entails higher levels of risk.

Detailed explanation-2: -In Risk-Adjusted Discount Rate method, the discount rate to be used is the normal discount rate as by the risk factor.

Detailed explanation-3: -NPV = Net Present Value * Derived Risk / 100.

Detailed explanation-4: -The risk discount rate is the difference between an investment’s return and the risk-free rate of return. If an investment has a lower return than the risk-free rate, this difference is referred to as the risk discount; otherwise, it is called the risk premium.