Why are the companies with low cash flow unable to bear the risk of a large project?

Q: What happens if economic engineers invest too much in assets?

A: Economic engineers always combine finance with engineering and develop various models to deal with…

Q: Companies with low cash flow may be unable to bear the risk of a large project. why?

A: The amount of cash being transferred into and out of the business which directly affects the…

Q: Why are accruals called spontaneous sources of funds, what are their costs, and why don't firms use…

A: Under the business setting, the spontaneous funds source states to the financing that arises from…

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

A:

Q: “The stand-alone risk of an individual corporate project may be quite high, but viewed in the…

A: Portfolio is the collection of projects/ financial instruments which are well diversified, which…

Q: Is this statement true or false? Please explain in detail Companies should always finance projects…

A: Return on investment or ROI is referred as the financial metric, which measures the probability for…

Q: Explain why finance theory, combined with well-diversifiedinvestors and “homemade hedging,” might…

A: The question is based on the concept of risk management in well diversified efficient investment.

Q: Which of the following is true about the WACC? It’s the appropriate discount rate for all new…

A: Solution:- Weighted Average Cost of Capital (WACC) means the minimum rate of return required by the…

Q: Ehrmann Data Systems is considering a project that has the following cash flow and WACC data. What…

A: Year 0 cashflow (CF0) = - $1000 CF1 = $450 CF2 = $450 CF3 = $450 r = 10% n = 3 years

Q: Why there are some companies invest so much capital in a project with so many risks? What are the…

A: organisation are there to execute projects and projects involved risk and without risk no profit is…

Q: True or False: It is often impossible to forecast the cash flows from follow-on projects associated…

A: TRUE

Q: The NPV Rule O is flawed due to a technical factor called the 'reinvestment rate assumption. O is…

A: Net Present value is the difference between the present value of cash inflows and cash outflows.…

Q: Why the payback method is often considered inferior to discounted cash flow in capital investment…

A: Payback period is capital budgeting technique which tells how much time will it take for Ann…

Q: Should companies completely avoid high-risk projects? Explain.

A: A huge-risk venture is one that has either a tall rate possibility of capital misfortune or…

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

A: Net present value (NPV) is the difference between present value of future cashflows and initial…

Q: what does it mean if the npv and irr are both negative quora, should the company invest in the…

A: Capital Budgeting entails long-term planning and monitoring of capital expenditures, as well as a…

Q: How do companies manage risk? What are the factors that contribute to a high-risk project?

A: In business there must be ups and downs in their business surroundings.  In every business there…

Q: Which of the following items describes a weakness of the internal rate-of-return method?a. The…

A: IRR (Internal Rate of Return):

Q: Is it feasible for a new company endeavor to be lucrative while still experiencing financial…

A: Meaning of Lucrative Lucrative which simply describes as brings profitability into the business…

Q: 3. Suppose your firm is going to finance a new investment project with only retained earnings. The…

A: Introduction: Risk free rate is the rate that an investor can receive without taking any chances or…

Q: Which of the following is NOT a disadvantage of the Payback Period project evaluation method?…

A: Payback period is the number of years required to get back the initial investment made in a capital…

Q: Which of the following statements is false? The NPV and IRR always provide the same accept/reject…

A: The IRR is the rate of return at which the present value of the future cash flows is equal to the…

Q: cash conversion cycle

A: Cash conversion cycle is a metric that the company uses to measure the time that it would take to…

Q: When the present value of the cash inflows exceeds the initial cost of a project, then the project…

A: If present value of cash inflows exceeds the initial cost of a project, then NPV of the project will…

Q: Why is the capital budgeting decision crucial and important for a firm? State why the capital…

A: Capital Budgeting is a decision making process in which company requires to evaluate long-term…

Q: Which of the following would cause a project to have a lower net present value, thereby making the…

A: Capital budgeting techniques include: Net Present Value Profitability Index Internal Rate of Return…

Q: Why should companies use a project’s free cash flows rather than accountingincome when determining a…

A: Capital budgeting analysis is useful to know which projects are profitable and which are not. There…

Q: 3. Suppose your firm is going to finance a new investment project with only retained earnings. The…

A: Retained earnings is the income retained after paying dividend. It represents the capital remaining…

Q: Should companies completely avoid high-risk projects?

A: When we talk about risks involved in a project, then that risk can be of many types. Risks related…

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

A: Information Provided: WACC = 6.75%

Q: What logical arguments might you use to convince your boss to forego the project despite its high…

A: We should consider the qualitative factors of the project. It is possible that this project may…

Q: In capital budgeting decisions, are there reasons a company might choose to take a project that was…

A: Net present value (NPV) is value of all future cash flows discounted to the present value by either…

Q: Should companies bid for a project with a price under the "project bid price"? No, this will not…

A: The project bid price is the final price of the project which the buyer is willing to pay.…

Q: Why might it be rational for a small firm that does not have access to the capital markets touse the…

A: The payback period in one of the capital budgeting technique and it calculates the time period for…

Q: Why would a company like Chevron invest so much capital in a project with so many risks?

A: Unpredictable future and inherent risk embedded therein suffers major challenges during the exercise…

Q: If a firm must forgo a cash flow, not leasing an owned building for example, in order to accept some…

A: The lost cash flows are called in the finance parlance as "opportunity cost".

Q: A firm is about to double its assets to serve it’s rapidly growing market. It must choose between a…

A: Should the asset investment and financing decisions be jointly determined, or should each decision…

Q: Which of the following is a disadvantage of the IRR project evaluation method? Select one: a. It…

A: IRR is the rate at which NPV is zero.

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.