Projects S and L are equally risky, mutually exclusive, and have normal cash flows. Project S's IRR is 15%, while Project L's IRR is 12%. The two projects have the same NPV when the WACC is 7%. Which of the following statements is CORRECT? If the WACC for both projects is 10%, Project S will have a larger NPV than Project L. If the WACC for both projects is 18%, both projects will have positive NPVs. If the WACC for both projects is 13%, Project L will have a larger NPV than Project S. If the WACC for both projects is 9%, both projects will have negative NPVs.

Q: Define Continuous probability distribution

A: Probability Distribution: It is the list of values where each outcome is linked with the…

Q: Miller orr Model describes different levels such as____. a. Upper Limit b. Lower limit c. Return…

A: Cash is one of the important assets for the firm, and it affects the overall liquidity of the firm.…

Q: Explain positively correlated

A: Positive correlation: It's a connection between two factors that move the two factors pair — that…

Q: Explain noncumulative pari passu distribution?

A: Pari passu refers to equal footing in Latin. It is the situation where all the stakeholders of the…

Q: What is fundamental beta?

A: Introduction: Beta is nothing but a metric used to assess a portfolio’s uncertainty or risk, with a…

Q: Compare static theory and pecking order theory.

A: Static trade-off theory is based on the works of Modigliani and Miller. It initially stated that the…

Q: Set out and explain the function of the p/e ratio

A: P/E ratio is a vital valuation ratio used in relative valuation methods. The function of pe ratio…

Q: In linear regression, compare independent and dependent variables.

A: Linear regression refers to a time series model in statistics that is used for predictive analysis.…

Q: Describe in detail the Stochastic Discount Factor (SDF)and its components.

A: Stochastic discount factor is defined as the concept, which has the combination of the financial…

Q: Define variable consideration.

A: Variable considerations: Contracts having a degree of variability in the specified transaction…

Q: What is the difference between I and G spread measures?

A: The yield spread of the bond reflects the difference between the YTM(Yield to Maturity) of various…

Q: Define average return

A: The formula to compute average return as follows:

Q: Define binomial lattice

A: A binomial is a polynomial that includes the addition of two terms of the monomial.

Q: Explain gaining ratio

A: Introduction:- Gaining ratio may be defined as Gaining ratio is a type of financial tool, which…

Q: What is multiple IRRs?

A: Multiple IRRs IRR is a discounting rate at which an amount of investment equals PV of the future CF.…

Q: Define short hedges

A: A strategy through which the potential loss reduces that occurs from the movement of the asset's…

Q: What is a transfer price?

A: Inter division transactions:  When the different divisions under the same business organization are…

Q: Define asymmetric hedge

A: A strategy that helps to reduce the loss which occurs from the movement of the asset's price is term…

Q: Explain retention ratio

A: Retention Ratio represents the percentage of profits retained by a Company. The Retention ratio…

Q: Define Correlation as a concept

A: Introduction: Usually for any two variables, the change in one variable allows us to forecast change…

Q: What is disbursal rate

A: Disbursal rate is an important concept in the realm of financial markets and in the realm of fintech…

Q: what is single index model?

A: Single index model refers to the asset pricing model that can be used to measure the risk and return…

Q: What is a cross rate?

A: Cross rate is an exchange rate of currency between two countries, but both countries are not using…

Q: What is optimal distribution policy?

A: Optimal distribution policy can serve as a overall outline on how information can be communicated…

Risk Management Techniques

Risk management is the procedure of recognizing, analyzing, monitoring, and preventing the risks and threatening factors of investments and business. Risks can arise from various factors including internal controls, market changes, natural disasters, and failure in productions. Risk management techniques enable entities to control and minimize the risks as well as the threatening factors of the business and it also helps to improve the business.