Should the project be accepted or rejected?

Q: Differentiate between unacceptable investment alternatives and potentially acceptable ones?

A: An unacceptable investment refers to a financial asset or opportunity that carries significant risks…

Q: What are the implications of the weak‐form, semi-strong-form, and strong-form of the EMH for…

A: The Efficient Market Hypothesis (EMH) describes a stock market that is both operationally and…

Q: Is the project viable or not? Suggest reasons

A: The viability of a project is examined in a feasibility study to ascertain the likelihood of…

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: Why is there conflict between the NPV and IRR criteria between projects Y and Z? Which is typically…

A: In this question, we are required to determine the reason for conflict between IRR and NPV. Also, we…

Q: Describe the Project selection rules under the IRR criterion?

A: IRR (Internal rate of return) is one of capital budgeting techniques which is used to evaluate the…

Q: Is a method of screening out in certain situations an unacceptable investment alternative?

A: Capital budgeting is the technique that is used in business to determine the best investment…

Q: What is the goal of conservatism?

A: Definition:

Q: What are the unique risks of land development projects from the developer’s and lender’s points of…

A: The risks of land development projects from developer’s point of view: Planning risk: The ability…

Q: Which decision is called the abandonment decision?

A: Answer: The decisions relating to the company that provides flexibility to discontinue the project…

Q: FMS option

A: Options are called financial derivatives that provide buyers with the right, but not the obligation,…

Q: A project with a negative NPV should be rejected. O True O False

A: Net present value  = present value of future cash inflows discounted at desired rate of return -…

Q: Describe the methods of determining the Project Risk?

A: Project risk is an uncertain event or circumstance that affects at any rate one objective of a task,…

Q: How are IFRS and the codification related? Do you feel that IFRS adoption could happen without…

A: The question is related to International Financial Reporting Standards (IFRS) and Codification. The…

Q: What is the definition of "FMS option"?

A: Stock Option:A stock option (additionally referred to as a fairness option), offers an investor the…

Q: What is risk, and how does it affect decisions about investment?

A: Risk and return are related to each other while making investment.

Q: Which alternative is considered to be riskier, all else equal? and why?

A: Debt and Equity mix or only equity are the forms of capital structure which is chosen by the entity…

Q: Would the above decision change if they applied the IRR method? When do the two methods give…

A: Data given:   Scenario A Scenario B Year Free Cash Flow ($) Free Cash Flow ($) 0 -87000…

Q: How do you think a compromise between the major stakeholders could be reached?

A: Stakeholders is a wider term. Stakeholders means those parties who have interest in a company's…

Q: Is funding a type of risk?

A: Funding means providing the funds to the party and charging interest rates from them. Firms need…

Q: Why the prospect theory is important

A: Introduction:- Prospect theory is very important because it elaborates how we understand and value…

Q: What is the potentially acceptable investment alternative?

A: An alternative investment is a financial asset that doesn't can be categorized as one of the…

Q: What are the two keys in short-term decision making?

A: Definition:   Differential analysis: Differential analysis refers to the analysis of differential…

Q: In which situation are the project lives unequal?

A: Answer: A business will face a situation where multiple capital projects display a positive net…

Q: Determine the theoretical ex-rights price?

A: The determination of the theoretical ex-rights price is generally done when stocks are issued and…

Q: What is the fair value option?

A: Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So,…

Q: Explain why you would or would not recommend the project

A: Net Present Value (NPV) and Internal Rate of Return (IRR) are two financial metrics used in capital…

Q: What are the limitations of TCE approach to the make or buy decision?

A: TCE Approach is Transaction Cost Economics Theory. It means an activity should be performed within…

Q: What is commercial risk?

A: In financial terms, risk is defined as the possibility that the real profits from an outcome or…

Q: payback period, NPV, and IRR always lead to the same decision? Why or why not? If not, which one…

A: Step 1   One of the most essential choices a business owner or management will ever make is capital…

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.