The way in which Person X (financial analyst) use the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company. Introduction: Scenario analysis is a process of analyzing the possible future events. This analysis helps to determine the effect of what-if questions towards the net present value estimates. At the time when the firm begins to look for an alternative, then they can be able to find the possible project, which would result in a positive net present value (NPV).

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Answer 1

Question

Chapter 12, Problem 1OR

Summary Introduction

To discuss: The way in which Person X (financial analyst) use the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company.

Introduction:

Scenario analysis is a process of analyzing the possible future events. This analysis helps to determine the effect of what-if questions towards the net present value estimates. At the time when the firm begins to look for an alternative, then they can be able to find the possible project, which would result in a positive net present value (NPV).

Expert Solution & Answer

Explanation of Solution

The way wherein Person X uses the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company is as follows:

A 50 percent decrease in share price indicates that the market discounted cash flows at a higher price of the YP Company. As per the reporter views, the C Company has to take into account the risk associated with the gas and oil exploration and even the political risks for undertaking business in the Country A. The Person X has made a scenario analysis by assuming the worst possible consequences related to both risks. This analysis will help the management of the company to recognize the worst probable outcomes. As a result, the management of the company can take suitable steps to reduce the probability of the worst outcomes.

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1. Waterfront Inc. wishes to borrow on a short-term basis without reducing its current ratio below 1.25. At present its current assets and current liabilities are $1,600 and $1,000 respectively. How much can Waterfront Inc. borrow?

Question 3Footfall Manufacturing Ltd. reports the following financialinformation at the end of the current year:Net Sales $100,000Debtor’s turnover ratio (based onnet sales)2Inventory turnover ratio 1.25Fixed assets turnover ratio 0.8Debt to assets ratio 0.6Net profit margin 5%Gross profit margin 25%Return on investment 2%Use the given information to fill out the templates for incomestatement and balance sheet given below:Income Statement of Footfall Manufacturing Ltd. for the year endingDecember 31, 20XX(in $)Sales 100,000Cost of goodssoldGross profitOther expensesEarnings beforetaxTax @50%Earnings aftertaxBalance Sheet of Footfall Manufacturing Ltd. as at December 31, 20XX(in $)Liabilities Amount Assets AmountEquity Net fixed assetsLong termdebt50,000 InventoryShort termdebtDebtorsCashTOTAL TOTAL

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Answer 2

Question

Chapter 12, Problem 1OR

Summary Introduction

To discuss: The way in which Person X (financial analyst) use the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company.

Introduction:

Scenario analysis is a process of analyzing the possible future events. This analysis helps to determine the effect of what-if questions towards the net present value estimates. At the time when the firm begins to look for an alternative, then they can be able to find the possible project, which would result in a positive net present value (NPV).

Expert Solution & Answer

Explanation of Solution

The way wherein Person X uses the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company is as follows:

A 50 percent decrease in share price indicates that the market discounted cash flows at a higher price of the YP Company. As per the reporter views, the C Company has to take into account the risk associated with the gas and oil exploration and even the political risks for undertaking business in the Country A. The Person X has made a scenario analysis by assuming the worst possible consequences related to both risks. This analysis will help the management of the company to recognize the worst probable outcomes. As a result, the management of the company can take suitable steps to reduce the probability of the worst outcomes.

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Answer 3

Question

Chapter 12, Problem 1OR

Summary Introduction

To discuss: The way in which Person X (financial analyst) use the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company.

Introduction:

Scenario analysis is a process of analyzing the possible future events. This analysis helps to determine the effect of what-if questions towards the net present value estimates. At the time when the firm begins to look for an alternative, then they can be able to find the possible project, which would result in a positive net present value (NPV).

Expert Solution & Answer

Explanation of Solution

The way wherein Person X uses the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company is as follows:

A 50 percent decrease in share price indicates that the market discounted cash flows at a higher price of the YP Company. As per the reporter views, the C Company has to take into account the risk associated with the gas and oil exploration and even the political risks for undertaking business in the Country A. The Person X has made a scenario analysis by assuming the worst possible consequences related to both risks. This analysis will help the management of the company to recognize the worst probable outcomes. As a result, the management of the company can take suitable steps to reduce the probability of the worst outcomes.

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Answer 4

Question

Chapter 12, Problem 1OR

Summary Introduction

To discuss: The way in which Person X (financial analyst) use the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company.

Introduction:

Scenario analysis is a process of analyzing the possible future events. This analysis helps to determine the effect of what-if questions towards the net present value estimates. At the time when the firm begins to look for an alternative, then they can be able to find the possible project, which would result in a positive net present value (NPV).

Expert Solution & Answer

Explanation of Solution

The way wherein Person X uses the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company is as follows:

A 50 percent decrease in share price indicates that the market discounted cash flows at a higher price of the YP Company. As per the reporter views, the C Company has to take into account the risk associated with the gas and oil exploration and even the political risks for undertaking business in the Country A. The Person X has made a scenario analysis by assuming the worst possible consequences related to both risks. This analysis will help the management of the company to recognize the worst probable outcomes. As a result, the management of the company can take suitable steps to reduce the probability of the worst outcomes.

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Answer 5

Chapter 12, Problem 1OR

Summary Introduction

To discuss: The way in which Person X (financial analyst) use the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company.

Introduction:

Scenario analysis is a process of analyzing the possible future events. This analysis helps to determine the effect of what-if questions towards the net present value estimates. At the time when the firm begins to look for an alternative, then they can be able to find the possible project, which would result in a positive net present value (NPV).

Expert Solution & Answer

Explanation of Solution

The way wherein Person X uses the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company is as follows:

A 50 percent decrease in share price indicates that the market discounted cash flows at a higher price of the YP Company. As per the reporter views, the C Company has to take into account the risk associated with the gas and oil exploration and even the political risks for undertaking business in the Country A. The Person X has made a scenario analysis by assuming the worst possible consequences related to both risks. This analysis will help the management of the company to recognize the worst probable outcomes. As a result, the management of the company can take suitable steps to reduce the probability of the worst outcomes.

Answer 6

Chapter 12, Problem 1OR

Summary Introduction

To discuss: The way in which Person X (financial analyst) use the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company.

Introduction:

Scenario analysis is a process of analyzing the possible future events. This analysis helps to determine the effect of what-if questions towards the net present value estimates. At the time when the firm begins to look for an alternative, then they can be able to find the possible project, which would result in a positive net present value (NPV).

Expert Solution & Answer

Explanation of Solution

The way wherein Person X uses the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company is as follows:

A 50 percent decrease in share price indicates that the market discounted cash flows at a higher price of the YP Company. As per the reporter views, the C Company has to take into account the risk associated with the gas and oil exploration and even the political risks for undertaking business in the Country A. The Person X has made a scenario analysis by assuming the worst possible consequences related to both risks. This analysis will help the management of the company to recognize the worst probable outcomes. As a result, the management of the company can take suitable steps to reduce the probability of the worst outcomes.

Answer 7

Chapter 12, Problem 1OR

Summary Introduction

To discuss: The way in which Person X (financial analyst) use the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company.

Introduction:

Scenario analysis is a process of analyzing the possible future events. This analysis helps to determine the effect of what-if questions towards the net present value estimates. At the time when the firm begins to look for an alternative, then they can be able to find the possible project, which would result in a positive net present value (NPV).

Answer 8

Expert Solution & Answer

Explanation of Solution

The way wherein Person X uses the scenario analysis to assess the risk for entering into a joint venture in Country A with YF Company is as follows:

A 50 percent decrease in share price indicates that the market discounted cash flows at a higher price of the YP Company. As per the reporter views, the C Company has to take into account the risk associated with the gas and oil exploration and even the political risks for undertaking business in the Country A. The Person X has made a scenario analysis by assuming the worst possible consequences related to both risks. This analysis will help the management of the company to recognize the worst probable outcomes. As a result, the management of the company can take suitable steps to reduce the probability of the worst outcomes.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 12.1 - Are most mutually exclusive capital budgeting...Ch. 12.2 - Prob. 1FOP Ch. 12.2 - Prob. 12.2RQ Ch. 12.2 - Describe how each of the following behavioral...Ch. 12.3 - Briefly explain how the following items affect the...Ch. 12.4 - Prob. 1FOE Ch. 12.4 - Prob. 2FOE Ch. 12.4 - Describe the basic procedures involved in using...Ch. 12.4 - Explain why a firm whose stock is actively traded...Ch. 12.4 - Prob. 12.8RQ

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