Q: What happens if economic engineers invest too much in assets?
A: Economic engineers always combine finance with engineering and develop various models to deal with…
Q: If a project has a higher proportion of fixed to variable costs, holding the risk of its revenues…
A: A project consists of fixed as well as variable costs. Fixed costs remain fixed all the time,…
Q: Spending too little on fixed assets is also harmful to the firm how?
A:
Q: “The stand-alone risk of an individual corporate project may be quite high, but viewed in the…
A: Portfolio is the collection of projects/ financial instruments which are well diversified, which…
Q: Is this statement true or false? Please explain in detail Companies should always finance projects…
A: Return on investment or ROI is referred as the financial metric, which measures the probability for…
Q: Which of the following is true about the WACC? It’s the appropriate discount rate for all new…
A: Solution:- Weighted Average Cost of Capital (WACC) means the minimum rate of return required by the…
Q: Ehrmann Data Systems is considering a project that has the following cash flow and WACC data. What…
A: Year 0 cashflow (CF0) = - $1000 CF1 = $450 CF2 = $450 CF3 = $450 r = 10% n = 3 years
Q: Why there are some companies invest so much capital in a project with so many risks? What are the…
A: organisation are there to execute projects and projects involved risk and without risk no profit is…
Q: True or False: It is often impossible to forecast the cash flows from follow-on projects associated…
A: TRUE
Q: The NPV Rule O is flawed due to a technical factor called the 'reinvestment rate assumption. O is…
A: Net Present value is the difference between the present value of cash inflows and cash outflows.…
Q: Why the payback method is often considered inferior to discounted cash flow in capital investment…
A: Payback period is capital budgeting technique which tells how much time will it take for Ann…
Q: If a company has some extra cash that is lying idle and wants liquidity and safety in a government…
A: If company has excess cash in hand, it will invest in the liquid funds. So, that the company can…
Q: Should companies completely avoid high-risk projects? Explain.
A: A huge-risk venture is one that has either a tall rate possibility of capital misfortune or…
Q: A firm is considering Projects S and L, whose cash flows are shown below. These projects are…
A: Net present value (NPV) is the difference between present value of future cashflows and initial…
Q: Which of the following statements is False regarding the payback period method: DA Use as a tool in…
A: Statement -D is false.As payback period method is Non- discounting cash flow criteria…
Q: Cash flows from operations may not be sufficient for a firm to keep up with growth-related financing…
A: The question is based on the concept of capital management in a company. Company prefer to borrow…
Q: How do companies manage risk? What are the factors that contribute to a high-risk project?
A: In business there must be ups and downs in their business surroundings. In every business there…
Q: Which of the following items describes a weakness of the internal rate-of-return method?a. The…
A: IRR (Internal Rate of Return):
Q: 3. Suppose your firm is going to finance a new investment project with only retained earnings. The…
A: Introduction: Risk free rate is the rate that an investor can receive without taking any chances or…
Q: Which of the following is NOT a disadvantage of the Payback Period project evaluation method?…
A: Payback period is the number of years required to get back the initial investment made in a capital…
Q: Which of the following statements is false? The NPV and IRR always provide the same accept/reject…
A: The IRR is the rate of return at which the present value of the future cash flows is equal to the…
Q: cash conversion cycle
A: Cash conversion cycle is a metric that the company uses to measure the time that it would take to…
Q: How can we estimate Risky Cash Flow?
A: Companies always predict the cash flows related with the project because it helps to company to…
Q: When the present value of the cash inflows exceeds the initial cost of a project, then the project…
A: If present value of cash inflows exceeds the initial cost of a project, then NPV of the project will…
Q: Which of the following is NOT an assumption we have to make in order to use the WACC to carry out an…
A: There are some assumptions we have to make in order to use the Weighted Average Cost of capital as a…
Q: 3. Suppose your firm is going to finance a new investment project with only retained earnings. The…
A: Retained earnings is the income retained after paying dividend. It represents the capital remaining…
Q: WSP Inc. is involved in a wide range of unrelated projects. The company will pursue any project that…
A: Risk refers to possibility of failure or chances of loss related to projects. Higher risky projects…
Q: Should companies completely avoid high-risk projects?
A: When we talk about risks involved in a project, then that risk can be of many types. Risks related…
Q: ccording to the risk shifting (or asset substitution) hypothesis O Shareholders are keen to take…
A: Introduction : Risk shifting occurs when stockholders accept overly hazardous ventures with the…
Q: A firm is considering Projects S and L, whose cash flows are shown below. These projects are…
A: Information Provided: WACC = 6.75%
Q: What logical arguments might you use to convince your boss to forego the project despite its high…
A: We should consider the qualitative factors of the project. It is possible that this project may…
Q: In capital budgeting decisions, are there reasons a company might choose to take a project that was…
A: Net present value (NPV) is value of all future cash flows discounted to the present value by either…
Q: Why would a company like Chevron invest so much capital in a project with so many risks?
A: Unpredictable future and inherent risk embedded therein suffers major challenges during the exercise…
Q: If a firm must forgo a cash flow, not leasing an owned building for example, in order to accept some…
A: The lost cash flows are called in the finance parlance as "opportunity cost".
Q: what happens if a company doesn't manage risk ?
A: Risk management is important part of carrying the business activities. There are different types of…
Q: Payback is considered an unsophisticated capital budgeting technique because it a) gives explicit…
A: Capital budgeting is the method through which corporations make decisions of the acceptance and…
Q: Sexton Inc. is considering Projects S and L, whose cash flows are shown below. These projects are…
A: NPV It is the best alternative method used as an indicator of the dynamic calculations of an…
Q: Why are the companies with low cash flow unable to bear the risk of a large project?
A: Cash flows are the inflow and outflow of cash and cash equivalents within an organization.A company…
Q: A firm is considering Projects S and L, whose cash flows are shown below. These projects are…
A:
Companies with low cash flow may be unable to bear the risk of a large project. why?
Step by step
Solved in 2 steps
- Spending too little on fixed assets is also harmful to the firm how?Which are problems of the payback criterion? Check all that apply: It ignores cash flows after the cutoff date. It ignores the time value of money. It doesn't show the value created by a project. It doesn't fully reflect the risk of a project. It uses an arbitrary cutoff value. It is difficult to calculate.How can a company’s operations generate a healthy profitand yet produce meager or even negative cash flows?
- What logical arguments might you use to convince your boss to forego the project despite its high rate of return? Is it possible that making investments with expected returns higher than your company’s cost of capital will destroy value? If so, how?What should a company do when the cost of eliminating the conditions that create an IT risk exceeds the potential losses that may occur? a. Accept the risk b. Reduce the risk c. Avoid risk d. Transfer the riskWhy would a company choose to factor itsreceivables, given that it will get less money than thereceivables are worth?
- What are the possible actions that a firm can take if it experiences a financial failure?One of the indirect costs of financial distress is having to sell assets at lower than market value. Using examples explain what this is and how it could effect the value of a firm.Why would a company like Chevron invest so much capital in a project with so many risks?