In Theory, the Risk-Free Rate Is More Appropriate for the NPV

Multiple Choice

In theory, the risk-free rate is more appropriate for the NPV calculation in the certainty equivalent approach since:

A) it is assumed that there is no business-specific risk associated with the projects.
B) certainty equivalent factors cannot take negative values.
C) certainty equivalents imply zero risk.
D) certainty equivalents consider unsystematic risk only.