Should companies completely avoid high-risk projects? Explain.

Q: What is the difference between systematic and unsystematic risk?

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Why do you think CFOs tend to look at strategic concerns before they look at the NPV of a project?…

A: Net present value (NPV) is used by analysts and investors to evaluate the profitability of a project…

Q: What are the sources of risk associated with project development?

A: Variations in returns of an investment from its expected returns are called risk. The risk of an…

Q: How does the Broader Diversification Reduce Risk?

A: Portfolio is a pool of different investments/assets. Investors can categorize the risks in two…

Q: Discuss some ways the company could estimatethe project’s risk, and then explain how risk mightbe…

A: Answer: Company can estimate its project’s risk in the following ways: Important risk factors to be…

Q: Which of the following contributes positively to the value of a real option to delay investment?…

A: Real option:A real option is a selection made open to a firm's managers on prospects for business…

Q: Discuss how diversification reduces firm specific risk.

A: Diversification is investing money in many investments rather than a single investment. In…

Q: What is the initial cost of setting up the "stop-loss"  strategy?

A: The Stop-loss strategy is very useful which helps the investors to protect in the market, as the…

Q: Stakeholder involvement is very crucial in the EIA. Then What challenges will the project face if…

A: EIA (Environmental Impact Assessment) is referred as the process or procedure for evaluation of an…

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: What factors verify that the project is marginally acceptable?

A: Capital budgeting decisions are generally taken for long-term purposes that are irrevocable.…

Q: What alternatives do companies have for evaluating alternative projects or investments?

A: Capital Budgeting Techniques helps to decide the investment project that should be selected.

Q: What information is considered a necessary evil in constructing an investment policy statement?

A: Provide appropriate guidance on portfolio construction and management Maintain focus on the…

Q: is this statement true or false? and why?  Requiring a relative short pay-back period for projects…

A: Payback Period: It is a method used in capital budgeting to determine the period in which the…

Q: what does it mean if the NPV and IRR are both positive, should the company invest on the project or…

A: Net Present value refers to the present value of future cash flow, which means cash flows generated…

Q: How can break-even analysis be helpful in evaluating project risk

A: Break even analysis helps us in determining that level of sales at which the company is at a point…

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: Explain the term Flaws in Project Ranking by IRR?

A: Answer: IRR is nothing but an internal rate of return; it is the rate of discount which makes a…

Q: Define operating leverage with examples and why it is potentially risky.?

A: Operating leverage is used to measure a company’s fixed costs as a percentage of its total costs. A…

Q: How weak reserch culture have an affect on Low potential investment? Explain in detail.

A: The low potential investment is also known as the low-risk investment. It refers to the investment…

Q: risks that an organisation can be exposed to when undertaking a new investment

A: Introduction: A company would enter into various types of investments and these investments would…

Q: How a successful engineering project affects a firm's market value?

A: Concept Market Value is value of a company in terms of its share value in the current market .It is…

Q: Why have ETFs grown to become one of the most popular investment products? What are some of the…

A: Exchange traded funds are all such mutual funds which will be traded over the exchanges and they are…

Q: How can diversification reduce risks? Give examples from the rea world

A: Diversification is the process of managing risk which mixes the individual investments in a…

Q: How should firms evaluate projects with different risks?

A: Project evaluation is carried out by organization to know if a particular project is suitable for…

Q: Discuss the following statement: “A project may not be very riskyin spite of its high sensitivity to…

A: Sensitivity analysis is defined as the percentage change in one variable with respect to percentage…

Q: When Projects Require Only Operating and Investing Activities?

A: Operating activities are those activities that directly relate to the principal business activities…

Q: How can we determine whether the project under consideration is of normal risk?

A: Introduction: Risk is nothing but the variation in real returns obtained as opposed to expected…

Q: hat are some of the difficulties that might occur with the application of an IRR approach in project…

A: Internal rate of return at which present value of cash flow is initial investment of the project and…

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: What factors contribute to the risk of overusing financial leverage?

A: Financial leverage is the use of debt in the capital structure to acquire additional assets. Use of…

Q: What is the financial advantage (disadvantage) of further processing the intermediateproduct?

A: Further Processing means carrying the production of goods to another level and shifting its…

Q: Financially, what is the economic worth of outbidding thecompetitors for a project?

A: Companies often exploit opportunities in the market because they will create positive NPV for the…

Q: It is possible to eliminate all risk by diversification? Explain your answer

A: Diversification is a technique used to reduce risk by investing in variety of assets. It is a risk…

Q: How are the generation and evaluation of creative investment proposals far too important task?

A: Investment appraisal or evaluation is the two-fold task of balancing risk pertain to a definite…

Q: hich project should the company pursue? Why?

A: NPV = Present value of cashinflows - Present value of cash outlay.

Q: If a firm cannot measure a potential project’s risk with precision, should it abandonthe project?…

A: As per common dictionary, risk means chances of loss. There are two types of risk: Known Risks  and…

Q: If the initial cost of an investment project is not totally sunk (the project is not totally…

A: given information sunk cost is irreversible cost, the explanation starts from the step 2

Q: How important are assumptions in preparing a business project feasibility? Justify your answer. What…

A: A development plan, sometimes referred as a feasible analysis or sustainability report, is a method…

Q: Illustrate the main factors of Project Risk?

A: The project risk is defined as the uncertain event or condition that occurs mainly on positive or…

Q: Discuss how diversification can enhance risk reduction?

A: Introduction : Diversification can be understood as the act of distributing resources in such a…

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: What is hedging and how is it different from diversification? If a firm needs to manage its risk,…

A: A hedge is an investment that is made fully intent on diminishing the danger of unfriendly value…

Q: Is it easier to measure the stand-alone, within-firm, or beta risk for projects such as anew…

A: Pure play technique can be used to compute project beta. In this technique, beta of companies having…

Q: How does risk management affect a company’s ability to finance its projects?

A: Risk is associated with every business; there are some risks which are controllable by the…

Q: Why is it costly to develop resources?

A: The cost of natural resources includes the cost of acquiring and preparing the resource extraction.…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.