INTERMEDIATE FINAN.MGMT.(LL)-W/MINDTAP
INTERMEDIATE FINAN.MGMT.(LL)-W/MINDTAP
14th Edition
ISBN: 9780357533611
Author: Brigham
Publisher: CENGAGE L
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Chapter 13, Problem 9MC
  1. (1) What are the three types of risk that are relevant in capital budgeting?
  2. (2) How is each of these risk types measured, and how do they relate to one another?
  3. (3) How is each type of risk used in the capital budgeting process?
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Scenario one: Under what circumstances would it be appropriate for a firm to use different cost of capital for its different operating divisions? If the overall firm WACC was used as the hurdle rate for all divisions, would the riskier division or the more conservative divisions tend to get most of the investment projects? Why? If you were to try to estimate the appropriate cost of capital for different divisions, what problems might you encounter? What are two techniques you could use to develop a rough estimate for each division’s cost of capital?
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Financial Risks - Part 1; Author: KnowledgEquity - Support for CPA;https://www.youtube.com/watch?v=mFjSYlBS-VE;License: Standard youtube license