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How would you adjust for risk of the projects in utilizing any capital investment decision model?
Wiki User
∙ 15y ago
It all depends on the type of an investment, project. The riskier the project the higher the expe cted fee/profit; the less riskier the project the lesser the fee/profit.
Wiki User
∙ 15y ago
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What are the basic financial decision in an organization?
The basic financial decisions include long term investment decisions, financing decisions and dividend decisions. Investment Decision relates to the selection of assets in which funds will be invested by a firm. These decisions are of two types Capital Budgeting Decisions and Working Capital Decisions. Financing Decision is broadly concerned with the asset-mix or the composition of the assets of a firm. The concern of the financing decision is with the financing-mix or capital structure or leverage. Dividend Policy Decision isrelated to the dividend policy.
What is The average cost associated with each additional dollar of financing for investment projects is?
the marginal cost of capital "B"
What is the rate of return a firm must earn on its investment projects in order to maintain the market value of its stock?
cost of capital :)
What decision criteria should managers use in selecting projects when there is not enough capital to invest in all available positive NPV projects?
Profitability index criteria can be used to select projects when a capital rationing situation exists, with the highest profititibility index from specified projects being the goal.
Why Capital budgeting is necessary?
Capital budgeting is necessary for a business so that they can estimate and evaluate how much value projects they undertake will have to the firm. It is also necessary so that the business can compare investment options and be able to logically figure which projects are the best investments for the company.
What are the characteristics of a capital investment decision?
The characteristic of a capital investment decision is an investment of long-term choices about which projects receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders.On the other hand, a short-term decision deal with the short-term balance of current assets and current liabilities; the focus here is on managing cash, inventories, and short-termborrowing and lending (such as the terms on credit extended to customers)
How do you explain cost of capital and its types?
Explain the term cost of capital and its importance in investment decision
What are the basic financial decision in an organization?
The basic financial decisions include long term investment decisions, financing decisions and dividend decisions. Investment Decision relates to the selection of assets in which funds will be invested by a firm. These decisions are of two types Capital Budgeting Decisions and Working Capital Decisions. Financing Decision is broadly concerned with the asset-mix or the composition of the assets of a firm. The concern of the financing decision is with the financing-mix or capital structure or leverage. Dividend Policy Decision isrelated to the dividend policy.
What are the differences between capital reserves and revenue reserves?
capital reserve is a type of account on a company's balance sheet that is reserved for longterm capital investment projects or any other large expenses that will be incurred in the future. capital reserve is a type of account on a company's balance sheet that is reserved for longterm capital investment projects or any other large expenses that will be incurred in the future.
What has the author Robert W Wright written?
Robert W. Wright has written: 'Investment decision in industry' -- subject(s): Capital investments, Decision-making, Mathematical models
What is The average cost associated with each additional dollar of financing for investment projects is?
the marginal cost of capital "B"
What is the advantages and disadvantages of profitability index?
Profitability Index AdvantagesTells whether an investment increases the firm's valueConsiders all cash flows of the projectConsiders the time value of moneyConsiders the risk of future cash flows (through the cost of capital) Useful in ranking and selecting projects when capital is rationedDisadvantagesRequires an estimate of the cost of capital in order to calculate the profitability indexMay not give the correct decision when used to compare mutually exclusive projects
What has the author William Clyde House written?
William Clyde House has written: 'Sensitivity analysis in making capital investment decisions' -- subject(s): Capital expenditure, Decision making
What has the author Robert H Rosenberg written?
Robert H. Rosenberg has written: 'A survey of capital investment decision making in U.K. companies'
How can you calculate Incremental working capital investment rate?
Incremental net working capital investment rate = Incremental working capital investment / Incremental sales.
What is the rate of return a firm must earn on its investment projects in order to maintain the market value of its stock?
cost of capital :)
What are the limitations of capital budgeting process?
Capital budgeting limitations are as follows:-It has long term implementations which can't be used in short term & it is used as operations of the business. A wrong decision in the early stages can affect the long term survival of the company. The operating cost gets increased when the investment of fixed assets is more than required.Inadequate investment makes it difficult for the company to increase its budget & the capital.Capital budgeting involves large number of funds so the decision has to be taken carefully.Decisions in capital budgeting are not modifiable as it is hard to locate the market for capital goods.The estimation can be in respect of cash outflow and the revenues or saving & costs attached which are with projects.
