If a firm applies the same discount rate to all projects for all of its divisions, the firm will incorrectly evaluate projects and will also become riskier over time. Explain why this occurs and how it can be prevented

Q: One of the indirect costs of financial distress is having to sell assets at lower than market value.…

A: Indirect costs of financial distress is not the directly present cost in the financial statements…

Q: Spending too little on fixed assets is also harmful to the firm how?

A:

Q: Disadvantage of the payback method include: Answer choices are below: A) does not consider cash…

A: The correct answer is D) all of the above. The payback method indeed has several disadvantages. It…

Q: Suppose you finance a project partly with debt, you should neither subtract the debt proceeds from…

A: The statement in question is addressing two key aspects of project financing and cash flow…

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: A firm should never undertake an investment if accepting the project would cause an increase in the…

A: It is wrong to say so. The expected return on investment (ROI) of a project related to the cost of…

Q: How are conflicts between the shareholders and the management created? Which of the following is…

A: Conflicts between the shareholders and the management majorly arise due to the differences in…

Q: f a project is more risky than the firm, and you use the WACC of the form to evaluate the project.…

A: Required rate is the expected rate of return of the project and that depends on the risk of the…

Q: Garcia Real Estate is involved in commercial real estate ventures throughout the United States, Some…

A: The risk-adjusted discount rate or RADR is a technique that helps in finding the current value of a…

Q: most significant drawback of evaluating investment centers using RO

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Q: V3.  In the Marriott example, one discussion point considered when a firm might use a single hurtle…

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Q: Kosovski Company is considering Projects S and L, whose cash flows are shown below. These projects…

A: IRR is also known as Internal rate of Return. It is a capital budgeting technique which helps in…

Q: 4 Deirdre, the production manager at Pheonix Manufacturing Company decided to choose a supplier with…

A: Based on the scenario described, the correct answer is: Risk avoidingRisk avoiding: In this…

Q: Of the following choices, which one is an example of erosion and should be included in a capital…

A: Erosion is reflective of loss of revenues of a company due to introduction of new product and the…

Q: If an investment project will positively affect the cash flows of other products the firm currently…

A: Cannibalization can be defined as the negative effect on the existing business line or the product…

Q: rrier to entry that helps increase the threat of new entrants for an incumbent firm using a…

A: In the context of a competition, cost leadership refers to a company's claim to be the cheapest…

Q: Suppose profits earned by one firm are independent of profits earned by other firms. When managers…

A: Individuals, organizations, or entities that possess equity or shares in a corporation are known as…

Q: Capital investments can be very risky; they are usually long-term decisions that require large sums…

A: Capital investments are also known as capital expenditures.These investments are made from a long…

Q: what is meant by the term break-even point? why should a manager be concerned about the breakeven…

A: Financial statements are statements which states the business activities performed by the company .…

Q: A firm should never undertake an investment if accepting the project would cause an increase in the…

A: It is wrong to say so. The expected return on investment (ROI) of a project related to the cost of…

Q: Explain the positive and negative aspects of using alternative time horizons when evaluating a…

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Q: minimize overall risk

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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: What is the fundamental flaw in utilizing income from operations as a success metric for investment…

A: Introduction: Investment centers are companies that make investments to boost their profits.

Q: Many firms still use the internal rate of return rule instead of net present value. When used…

A: The net present value (NPV) and internal rate of return (IRR) are the methods that are used for the…

Q: A company that has several very different lines of business should always use only one “beta” to…

A: FalseExplanation:A company with several very different lines of business should not use only one…

Q: Net present value: is very similar in its methodology to the average accounting return. is the…

A: Capital budgeting: A business goes through the process of capital budgeting to look at potential big…

Q: Securitization has its upside (primarily liquidity and diversification), but it has its downside as…

A: Securitization is a complex financial process where assets are bundled together and transformed into…

Q: In your opinion, where should companies spend most of their quality funds: on prevention,…

A: Firstly we need to understand following Costs: Prevention costs: These are incurred in preventing…

Q: What theorem is this a plain-language interpretation of? "Leaving an investment that loses money on…

A: The term "investment" describes the distribution of resources, most commonly money, with the hope of…

Q: The following is a disadvantage of ARR investment appraisal method (select one):   A. multiple or…

A: Accounting rate of return is a method that is used for evaluating the investment proposal. It is…

Q: In general, if an action increases a firm's value by providing benefits with a value greater than…

A: The value of the firm showing the current value of the firm in the market it comprises common…

Q: when a firm might use a single hurtle rather than different divisional or business unit rates. When…

A: Hurdle rate is the rate at which the upcoming or potential projects are evaluated. In other words,…

Q: Companies have found that offering discounts to customers in return for early payment can be…

A: Inventory management is an integral part of working capital management. Inventory is a crucial…

Q: Companies have found that offering discounts to customers in return for early payment can be…

A: The additional current assets that a corporation retains on its balance sheet as a liquidity buffer…