A. )
Several methods are available to deal with the issue of differing levels of project risk. These include risk adjusted discount rates, simulation analysis, scenario analysis, and break-even analysis. Which of these would you favor if you were CFO of a corporation? Why? Which of the techniques seems like it would yield the most accurate results? Which would be easiest to implement? Elaborate and Explain please
B.)
A corporationâs policy manual states: "Our companyâs policy is to use 12%, which is our cost of capital, as the discount rate for NPV calculations on all projects considered for investment." What is wrong with this policy? In what types of projects will this company overinvest? In what types of projects will it underinvest? Elaborate and Explain please
A. )
Several methods are available to deal with the issue of differing levels of project risk. These include risk adjusted discount rates, simulation analysis, scenario analysis, and break-even analysis. Which of these would you favor if you were CFO of a corporation? Why? Which of the techniques seems like it would yield the most accurate results? Which would be easiest to implement? Elaborate and Explain please
B.)
A corporationâs policy manual states: "Our companyâs policy is to use 12%, which is our cost of capital, as the discount rate for NPV calculations on all projects considered for investment." What is wrong with this policy? In what types of projects will this company overinvest? In what types of projects will it underinvest? Elaborate and Explain please