what is mean by risk-return trade-off in capital budgeting?
CA PANKAJ KAPOOR
(ICAI Licentiate ICSI CMA (All India Rank Holder))
(191 Points)
Replied 23 August 2014
The principle that potential return rises with an increase in risk.
Low levels of uncertainty (low-risk) usally have low potential returns & vice versa
According to the risk-return tradeoff, invested money can render higher profits only if it is subject to the possibility of being lost(risk). (In simple terms risky capital proposals yeild more return).
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