xplain why it is important to understand that capital budgeting is subject to the validity of the forecasted data.  Additionally, explain whether this reduces the reliability of these types of tools.  Are there any other alternatives, or are these tools some of the most reliable that currently exist?

Q: Why will the standard deviation not be a good measure of risk when returns are negatively skewed

A: The standard deviation of returns is a measure of the volatility of market returns and determines…

Q: The empirical SML is too flat relative to what CAPM predicts. Researchers have focused on which two…

A: The empirical Security Market Line (SML) is a representation of the relationship between systematic…

Q: Using a wrong formula for CAPM is a __  (select one) a. Erronous model risk b. Market data…

A: Introduction : In simple word, the capital asset pricing model (CAPM) is the valuation model used to…

Q: Explain the problems of adverse selection and moral hazard caused by asymmetric information. How can…

A: A financial institution is a corporation or person who acts as another go for different parties in…

Q: Although most financial statements forecasting models are structurally similar, they have to be…

A: Financial statements forecasting models are made in spreadsheets in which all relevant cells are…

Q: Describe how underinvestment and asset substitution can destroy firm value and how risk management…

A: Underinvestment and asset replacement can have a negative impact on a company's value, however risk…

Q: conomics is concerned

A: To explain the correct option as,

Q: Monte Carlo methods is more advantageous with more uncertainties of data in the financial market. It…

A: Monte Carlo simulations are used to estimate the likelihood of various outcomes in a process that…

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: Performance evaluation allows us to assess the performance of fund managers going beyond historical…

A: The total risk is divided into two parts- 1. Systematic Risk that cannot be diversified…

Q: be saved. Assume that every asset has the same expected return and variance. Furthermore, all assets…

A: Variance:It is the measure of deviation value of expected return that varies from the mean position.…

Q: What is efficient set? Explain why rational investors will never chose a portfolio below the minimum…

A: What is efficient set?  Various configurations of securities yield various degrees of returns. The…

Q: What factors can contribute to unsuccessful budgeting? How can these situations be avoided?

A: Introduction: Budgeting is a collection of tasks done to plan a budget. A budget is a quantitative…

Q: Identify and explain the criticisms of using return on investment (ROI) as the onlyperformance…

A:

Q: If the security market is efficient in the strong form, then _____. Group of answer choices a. it…

A: There are three forms of market hypothesis weak form, semi-strong form and strong form

Q: When researching fund managers, which of the following statements is CORRECT? A) You would generally…

A: A person who is responsible for managing portfolios for their client and is responsible for all the…

Q: What is the biggest disadvantage of using ROI to evaluate investment centers?

A: Return on Investment: Under return on Investment, the investment opportunity with the highest rate…

Q: What does a low standard error mean relative to beta

A: Beta is a very important metric in finance in general and in the world of investing in particular.…

Q: We have seen that market timing has tremendous potential value. Would it therefore be wise to shift…

A: Securities selection is the process where financial securities are chosen and included in the…

Q: Assume that every asset has the same expected return and variance. Furthermore, all assets have the…

A: Variance is a statistical tool used to measure the extent to which the returns are spread from the…

Q: What are the consequences of using a poor benchmark to evaluate a fund manager?

A: Benchmark is the standard used for the comparison by the company to know the current performance…

Q: The scenario analysis technique is versatile and rich. Of all the forecasting techniques, it may be…

A: Scenario analysis - It is mainly used to analyse the pros and cons of  organisational decisions. In…

Q: Although we can determine the optimal bid and the expected profit from that bid in a bidding…

A: To determine the probability of winning in a bidding simulation, one must examine several factors…

Q: A sound risk mitigation plan improves the DCF, as it lowers the risk premium in the discount factor.

A: Discounted cashflow:Discounted Cash Flow (DCF) analysis is a valuation method that calculates the…

Q: How can investors and market participants navigate the presence of anomalies and the potential for…

A: Anomalies and Abnormal ReturnsAnomalies refer to the change in patterns or behaviours within the…

Q: Sometime the budgetary performance is seems to be a misleading and less effective if it is consider…

A: Budget: It is an estimated and effective way of the utilization of funds for the financial control…

Q: What role does MAD play in evaluating a forecasting model?

A: MAD refers to mean absolute deviation. It is also known as average absolute deviation which is the…

Q: The board of directors of AMSB are confused between IRR and NPV. Briefly discuss the Internal Rate…

A: The internal rate of return method is a capital budgeting method which helps in finding out the rate…

Q: What are the factors in determining the expected rate of return of LPs? Group of answer choices a.…

A: Limited partners (LPs) are investors in a limited partnership, such as a venture capital (VC) fund…

Q: Explain the term Flaws in Project Ranking by IRR?

A: Answer: IRR is nothing but an internal rate of return; it is the rate of discount which makes a…

Q: Each of the following are true of relevant information except O different alternatives can be…

A: Accounting is the process of recording, classifying, summarising and reporting accounting…

Q: How is the ERC (efficient response coefficient) determined and which role analyst forecasts play in…

A: The earnings response coefficient, or ERC, is a calculated ratio between stock returns and the…

Q: Anticipate TWO (2) drawbacks from the adverse selection on financial safety nets.

A: Financial Safety Nets- A financial safety net is not one savings account or an insurance guideline.…

Q: By use of practical examples, discuss the following types of information processing errors in…

A: Behavioral finance looks at the reason as to why investors behave in an irrational manner when they…

Q: sensitivity analysis as determined by NPV Breakeven sensitivity.  H

A: Sensitivity analysis refers to the model of finance that is helpful in determining the target…

Q: How weak reserch culture have an affect on Low potential investment? Explain in detail.

A: The low potential investment is also known as the low-risk investment. It refers to the investment…

Q: When we perform sensitivity analysis for mutually exclusive alternatives, itmay be more effective to…

A: Net present worth is acknowledged as the current worth or value of a project which is adjusted as…

Q: predict

A: Financial planning is always a challenging task for nay company & the things become even more…

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: A common approach of estimating the variability of returns involving forecasting the pessimistic,…

A:

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.