A firm is considering the purchase of an asset whose risk is greater than the firm’s current risk, based on all methods for assessing risk. In evaluating this asset, it would be reasonable for the decision maker to,,(Points: 5),Increase the IRR of the asset to reflect its greater risk. ,Increase the NPV of the asset to reflect the greater risk. ,Reject the asset, since its acceptance would increase the firm’s risk. ,Ignore the risk differential if the project would amount to only a small fraction of the firm’s total assets. ,Increase the cost of capital used to evaluate the project to reflect the project’s higher risk. ,,,
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