Question

Analyze risk associated with capital projects.

Analyze risk associated with capital projects.
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

Capital budgeting is the method of analyzing and selecting long term capital projects which are in line with the goal of companies wealth maximization.

The capital budgeting decisions are important, vital and significant business decisions because

1.substantial expenditure involved.  

2. long period for the project.  

3. irreversibility of decisions.

4. The complexity involved in decision making.

The risk associated with Capital projects can be:

1. Project Specific risk.

2. Company-Specific risk: like Corporate risk, Operational risk.

3. Industry-Specific Risk: like cyclic risk.

4. Market Risk: like Liquidity risk.

5. International risk: like foreign exchange risk.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
For a capital budgeting project, the cost of capital associated with the project is related to...
For a capital budgeting project, the cost of capital associated with the project is related to ___________. Group of answer choices the total risk of the firm’s equity the type of security to be issued to finance the project the type of assets needed for the project, that is, whether they are long-term or short-term assets the risk associated with the project the interest rate on the firm's existing long term bonds
​(​Risk-adjusted discount rates and risk classes​) The G. Wolfe Corporation is examining two​ capital-budgeting projects with​...
​(​Risk-adjusted discount rates and risk classes​) The G. Wolfe Corporation is examining two​ capital-budgeting projects with​ 5-year lives. The​ first, project​ A, is a replacement​ project; the​ second, project​ B, is a project unrelated to current operations. The G. Wolfe Corporation uses the​ risk-adjusted discount rate method and groups projects according to​ purpose, and then it uses a required rate of return or discount rate that has been preassigned to that purpose or risk class. The expected cash flows for...
The cost of capital is 15%. Cash flows associated with projects A,B,C,D,E are: CF0 CF1 CF2...
The cost of capital is 15%. Cash flows associated with projects A,B,C,D,E are: CF0 CF1 CF2 CF3 A -100 30 150 70 B -66 30 50 60 C -33 40 20 40 D -66 60 50 30 E -50 60 50 20 What will be the total NPV of the projects that you end up undertaking if you have 100 of cash to invest? Please round your answer to the second decimal.
The cost of capital is 15%. Cash flows associated with projects A,B,C,D,E are: CF0 CF1 CF2...
The cost of capital is 15%. Cash flows associated with projects A,B,C,D,E are: CF0 CF1 CF2 CF3 A -100 30 150 70 B -66 30 50 60 C -33 40 20 40 D -66 60 50 30 E -50 60 50 20 Which projects would you undertake if you have 100 of cash to invest? Question 7 options: A B C D E
Risk Assessment : Question 2 Analyze the risk associated with the cost of ingredients a)  Create a...
Risk Assessment : Question 2 Analyze the risk associated with the cost of ingredients a)  Create a visualization to show how a 25% and 50% increase  in the cost of sugar would affect the price of each cupcake.   Hint:  Often when doing analysis in excel, you need to set up a visualization where you can change a number in a "key" to see an effect elsewhere on a sheet.  This exercise gives you an opportunity to practice this skill by referencing numbers in a...
problems with using the same company-wide cost of capital for all projects include: a. biasing project...
problems with using the same company-wide cost of capital for all projects include: a. biasing project selection towards high-risk, high return projects b. rejection of worthwhile low risk projects c. spending an unjustified amount of managerial time to justify a lower cost of capital so the pet projects will be accepted d. both a and b
Suppose William Inc. uses a WACC of 9% for below-average risk projects, 11% for average-risk projects,...
Suppose William Inc. uses a WACC of 9% for below-average risk projects, 11% for average-risk projects, and 13% for above-average risk projects. Which of the following independent projects should William accept, assuming that the company uses the NPV method when choosing projects? Project A, which has average risk and an IRR = 12%. Project B, which has below-average risk and an IRR = 9.5%. Project C, which has above-average risk and an IRR = 13.5%. Without information about the projects'...
A company has a capital budget of $300 and is evaluating the following projects capital projects....
A company has a capital budget of $300 and is evaluating the following projects capital projects. What should the company do? Accept projects A and E Accept projects A and B Accept project B Accept projects C, and E Accept all the projects Project Initial Investment ($ millions) PV(NCF) ($ millions) A 200 420 B 300 660 C 200 380 D 200 330 E 100 250
When projects involve certain, or constant, cash flows, the capital budgeting analysis that can be conducted...
When projects involve certain, or constant, cash flows, the capital budgeting analysis that can be conducted is very simple and straightforward. Unfortunately, this type of project rarely exists. When a project’s cash flows, or the conditions that affect their magnitude or timing, vary from their expected values, then the analysis becomes more complicated. Projects that have the potential to exhibit greater or lesser levels of risk than the firm’s average, or normal, level means that adjustments should be made to...
Bam Corporation is considering the following independent projects for the coming year. Their target capital structure...
Bam Corporation is considering the following independent projects for the coming year. Their target capital structure is 60 percent debt and 40 percent equity. The after-tax cost of debt is 6 percent and the cost of equity is 15 percent.                                                                                                             Expected                                                                      Required                                Rate of                          Risk Project              Investment                               Return                         Level A                   $13 million                                17%                              High B                     16 million                                9                                 Low C                     25 million                                 14                               Average D                  ...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT