Certainty equivalents adjust an investment's cash outflows in terms of a risk-free return. 1) True 2) False The net present value assumes that cash inflows are reinvested at the net present value. 1) True 2) False Risk may be incorporated into capital budgeting by 1. increasing an investment's internal rate of return by a risk premium 2. adjusting the cash flows by the probability of occurrence 3. increasing the cost of capital by a risk premium 1) 1 and 2 2) 1 and 3 3) 2 and 3 4) 1, 2, and 3