Which of the following procedures is the best way to account for projects with higher relative...
Which of the following procedures is the best way to account for projects with higher relative risk?
a. It is better to always use the average WACC as the discount rate for any project.
b. Ignore risk because project risk cannot be measured accurately.
c. Adjust the WACC discount rate downward if the project is judged to have above-average risk.
d. Adjust the WACC discount rate upward if the project is judged to have above-average risk.
e. BOTH A. and B. are correct.
Homework Answers
Adjust the WACC discount rate upward if the project is judged to have above-average risk.
Add Answer to:
Which of the following procedures is the best way to account for
projects with higher relative...
Which of the following procedures does the text say is used most frequently by businesses when...
Which of the following procedures does the text say is used most frequently by businesses when they do capital budgeting analyses? Monte Carlo simulation uses a computer to generate random sets of inputs, those inputs are then used to determine a trial NPV, and a number of trial NPVs are averaged to find the project's expected NPV. Sensitivity and scenario analyses, on the other hand, require much more information regarding the input variables, including probability distributions and correlations among those...
Clifford Company is choosing between two projects. The larger project has an initial cost of $100,000,...
Clifford Company is choosing between two projects. The larger project has an initial cost of $100,000, annual cash flows of $30,000 for 5 years, and an IRR of 15.24%. The smaller project has an initial cost of $50,000, annual cash flows of $16,000 for 5 years, and an IRR of 16.63%. The projects are equally risky. Which of the following statements is CORRECT? Since the smaller project has the higher IRR, the two projects’ NPV profiles will cross, and the...
please help Question 1 2 points Save Answer Projects C and D both have normal cash...
please help
Question 1 2 points Save Answer Projects C and D both have normal cash flows and are mutually exclusive. Project C has a higher NPV exceeds 12%. Which of the following statements is CORRECT? O Project D is probably larger in scale than Project C. OProject C probably has a faster payback the WACC is less than 12%, whereas Project D has a higher NPV if the WACC Project C probably has a higher iRR The crossover rate...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration WSP Inc. is involved in a wide range of unrelated projects. The company will pursue any project that it thinks will create value for its stockholders. Consequently, the risk level of the company's projects tends to vary a great deal from project to project If WSP Inc. does not risk-adjust its discount rate for specific projects properly, which of the following is likely...
mu WSP Inc. is involved in a wide range of unrelated projects. The company will pursue...
mu WSP Inc. is involved in a wide range of unrelated projects. The company will pursue any project that it thinks will create value for its stockholders. Consequently, the risk level of the company's projects tends to vary a great deal from project to project. for special IF WSP Inc. does not risk-adjust its discount rate for specific projects properly, which of the following is likely to occur over time? Check all that apply. operty, which of ti The firm...
You are considering the following two mutually exclusive projects. The required rate of return is 10.75...
You are considering the following two mutually exclusive projects. The required rate of return is 10.75 percent for project A and 12 percent for project B. Which project should you accept and why? Project A -36,000 21,600 18,200 22,100 Project B -69,900 52,600 46,100 Year 1 2 3 0 Project B; because it has the largest total cash inflow Project A; because its NPV is about $796 more than the NPV of Project B Project B; because it returns all...
Understanding risks that affect projects and the impact of risk consideration Garcia Real Estate is involved...
Understanding risks that affect projects and the impact of risk consideration Garcia Real Estate is involved in commercial real estate ventures throughout the United States. Some of these ventures are much riskier than other ventures because of market conditions in different regions of the country. If Garcia does not risk-adjust its discount rate for specific ventures properly, which of the following is likely to occur over time? Check all that apply. I The firm could potentially reject projects that provide...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions...
Which of the following procedures does the text say is used most frequently by businesses when they do capital budgeting analyses? Monte Carlo simulation uses a computer to generate random sets of inputs, those inputs are then used to determine a trial NPV, and a number of trial NPVs are averaged to find the project's expected NPV. Sensitivity and scenario analyses, on the other hand, require much more information regarding the input variables, including probability distributions and correlations among those...
please help
Question 1 2 points Save Answer Projects C and D both have normal cash flows and are mutually exclusive. Project C has a higher NPV exceeds 12%. Which of the following statements is CORRECT? O Project D is probably larger in scale than Project C. OProject C probably has a faster payback the WACC is less than 12%, whereas Project D has a higher NPV if the WACC Project C probably has a higher iRR The crossover rate...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration WSP Inc. is involved in a wide range of unrelated projects. The company will pursue any project that it thinks will create value for its stockholders. Consequently, the risk level of the company's projects tends to vary a great deal from project to project If WSP Inc. does not risk-adjust its discount rate for specific projects properly, which of the following is likely...
mu WSP Inc. is involved in a wide range of unrelated projects. The company will pursue any project that it thinks will create value for its stockholders. Consequently, the risk level of the company's projects tends to vary a great deal from project to project. for special IF WSP Inc. does not risk-adjust its discount rate for specific projects properly, which of the following is likely to occur over time? Check all that apply. operty, which of ti The firm...
You are considering the following two mutually exclusive projects. The required rate of return is 10.75 percent for project A and 12 percent for project B. Which project should you accept and why? Project A -36,000 21,600 18,200 22,100 Project B -69,900 52,600 46,100 Year 1 2 3 0 Project B; because it has the largest total cash inflow Project A; because its NPV is about $796 more than the NPV of Project B Project B; because it returns all...
Understanding risks that affect projects and the impact of risk consideration Garcia Real Estate is involved in commercial real estate ventures throughout the United States. Some of these ventures are much riskier than other ventures because of market conditions in different regions of the country. If Garcia does not risk-adjust its discount rate for specific ventures properly, which of the following is likely to occur over time? Check all that apply. I The firm could potentially reject projects that provide...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions...
Most questions answered within 3 hours.
-
Write out a paraphrasing response that includes both parts for
the following scenarios.
1. Paraphrasing the...
asked 12 minutes ago -
A hydraulic lift with a 25.0 cm diameter is supporting the
weight of a 2930 kg...
asked 4 minutes ago -
Iron ore is converted to iron metal in a reaction with
carbon.
2 Fe2O3 (s) +...
asked 4 minutes ago -
Discuss key concepts of toxicology as an aspect of
environmental epidemiology. Provide at least two important...
asked 9 minutes ago -
4. A country with a higher depreciation rate of capital will end
up having
A) a...
asked 19 minutes ago -
5. What are the main ethical challenges with new technologies
(choose tech and write about
asked 30 minutes ago -
Use the list of sequence ["ATATCCG", "TCCG", "ATGTACTG",
"ATGGCTG", "ATCA"] as an example, write a program...
asked 34 minutes ago -
The producer of a downloadable antivirus software program spends
exactly $2,750,000 producing the first copy and...
asked 39 minutes ago -
How many water molecules are associated with the compound iron
(II) sulfate heptahydrate?
Group of answer...
asked 37 minutes ago -
Two charges are placed on the x-axis. One has a charge of
35μCand is placed at...
asked 48 minutes ago -
1a. . If the temperature of an ideal gas is raised from 10 °C to
210...
asked 53 minutes ago -
A 95% confidence interval for a population proportion p
is (0.25, 0.45). Using the same sample,...
asked 1 hour ago