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What is the importance of the Technique used for analysis on Capital budgeting cost for a projects?
Step by step
Solved in 2 steps
- (1) What are the three types of risk that are relevant in capital budgeting? (2) How is each of these risk types measured, and how do they relate to one another? (3) How is each type of risk used in the capital budgeting process?What information is included in the capital asset budget?What types of projects require the least detailed and the most detailed analyses in the capital budgeting process?
- Why are interest charges not deducted when a projects cash flows are calculated for use in a capital budgeting analysis?What are the principal objections to the use of the average rate of return method in evaluating capital investment proposals?Why is risk incorporated into capital budgeting and how is it incorporated into the process of evaluating a project?
- How would you relate the financial statement analysis tools with project evaluation techniques (capital budgeting)?Why should the cost of capital used in capital budgeting be calculated as a weighted average of the capital component rather than the cost of the specific financing used to fund a particular project? Please explain using the images attached.How are project classifications used in the capital budgeting process?