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Risk in a revenue producing project can best be adjusted for by ____. A. Reducing the NPV by 10 percent for risky projects B. Adjusting

Risk in a revenue producing project can best be adjusted for by ____.

A. Reducing the NPV by 10 percent for risky projects

B. Adjusting the discount rate downward for increasing risk

C. Picking a risk factor equal to the average discount rate

D. Adjusting the discount rate upward for increasing risk

The solution is D, but I do not understand why. Could someone please give me an explanation?

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