After tax cash flow = Earnings after tax  +  __________ A sunk cost is one that has been incurred and it is not relevant to __________   decisions. Total  Risk  =  Systematic Risk  +  __________   risk Systematic risk reflects exposure to __________ wide events, such as interest rate changes and business cycles, Expected return on risky asset = Risk free interest rate +  __________  premium + Risk premium.

Q: why an increase in cost of debt will increase cost of capital associated with business risk and…

A: The cost of capital is the minimal rate of return that a company must earn before it may generate…

Q: Investors will pay a premium to invest in risky assets. OA. True OB. False

A: Risk premium is the extra return  that an investor receives for investing in risky assets.

Q: xplain what is meant by the term ‘financial distress’. If we assume that financial distress exists,…

A: Explain what is meant by the term ‘financial distress’ Answer: Meaning of  'Financial distress' -…

Q: __________ focus more on underlying determinants of future profitability than the past price…

A: The investor predicts the future price movements of the stocks using past patterns. Different…

Q: As the level of risk increases, the corresponding cost of capital (i.e. the return) must…

A: As there is an increase in the risk level, investors would be demanding a higher return on an…

Q: The higher the _____________, the higher the financial risk, and the higher the ____________. a.…

A: Interest rates and price of bonds has reverse relationship. With increase in interest rates, the…

Q: An underpriced stock provides an expected return which is _______________ the appropriate required…

A: In Assets pricing model the gives the required rate based on risk involved in the stock and stocks…

Q: Which of the following statements is incorrect? Multiple Choice О Purchasing fixed assets through…

A: The objective of the question is to identify the incorrect statement among the given options related…

Q: Why do companies accelerate depreciation on their tax return but often use slower depreciation…

A: Companies generally use accelerated depreciation on their tax return, as these methods result in a…

Q: Decreases in economic benefits in the form of outflows or depletions of assets or incurrences of…

A: Lets understand the basics.Lets understand the basics.Elements of Financial Statements:The…

Q: Value at Risk (VaR) is a statistical measure of maximum loss used by banks and other financial…

A: Value at Risk is a technique used by institutions to analyze the potential risk assessed in the…

Q: Following IFRS, which statement is false? Group of answer choices If the revaluation initially…

A: The objective of this question is to identify the false statement among the given options related to…

Q: Following IFRS, which statement is false? Group of answer choices If the long-term operating…

A: The objective of the question is to identify the incorrect statement regarding the treatment of…

Q: What are the likely effects of a policy in which a company fails to adjust for difference in risk…

A: The cost of capital is a critical financial concept for companies. It represents the return expected…

Q: The additional return earned by holding a commodity that is in short supply or a nonpecuniary gain…

A: Answer- The Convenience Yield - A premium that is earned by people who hold a physical commodity.…

Q: Following IFRS, which statement is false? Group of answer choices The revaluation surplus account…

A: The objective of this question is to identify the false statement among the given options related to…

Q: Balance Sheet Insolvency occurs when Liabilities are greater than the Assets resulting in negative…

A: Insolvency Risk: Insolvency risk is a probability that an enterprise cannot satisfy its debt…

Q: Discuss why it is advisable to invest in a group of financial assets rather than investing in just…

A: An investment is refer as an asset purchased with intention to earn income at some time in future.…

Q: Following IFRS, which statement is false? Group of answer choices The revaluation surplus account…

A: The objective of the question is to identify the false statement among the given options related to…

Q: Reinvestment risk occurs when a financial institution holds longer-term assets relative to…

A: Reinvesting means putting the profit back into the same scheme.

Q: 1. The more optimistic investors are about a company’s future profits, the ________ the ratio of the…

A: Market value is the total value of stocks that company fetch in the market. It is calculated by…

Q: The possibility that a business may not be able to repay a bank loan because of an economic downturn…

A: Risk management is the process of identifying, assessing and controlling threats to an…

Q: For a company holding significant net financial assets (NFO), after issuing some new debt, its risk…

A: Risk in operation: When a company issues new debt, it adds financial leverage to its capital…

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.