Question

Now drag the Low risk and High risk project points so their expected rates of return are 7% and 11%, respectively. If you could choose only one project to go forward, which would you choose? a. Project Low because its expected rate of return is close to its WACC. b. Project Average because its expected rate of return equals its WACC and the others are both below their respective WACC's. c. Project High because its expected rate of return is higher than for any of the other projects. d. Any are good choices because the WACC balances the risk.

Answer 1

If we could choose only one project to go forward, we would choose Project Low because its expected rate is higher than WACC.

What is risk management?

Project management uses risk management techniques. The Project Management Institute defines project risk as "an unpredictable occurrence or circumstance that, if it occurs, has either a positive or negative effect on a project's objectives." Clear roles and duties, supportive organisational variables, and technical analyses are all necessary for effective project risk management.

Project risk management may start chronologically by identifying a threat or by analysing an opportunity. These could, for instance, be novel items or competitor advancements. This is typically carried out qualitatively or semi-quantitatively utilising product or average models due to a lack of definition. Where appropriate, this strategy is used to rank potential answers.

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