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What is the major problem in using this approach to handle risk in capital budgeting?
The major problem in using a single approach to handle risk in capital budgeting is that it often oversimplifies complex uncertainties and fails to capture the full spectrum of outcomes. This can lead to misinformed decision-making as it may not adequately account for variability in cash flows, market conditions, or project-specific risks. Additionally, relying on one method can ignore qualitative factors and the interdependence of various risks, potentially resulting in unrealistic projections and financial losses.
How do time value money concepts assist a company in making capital budgeting decisions?
Time value of Money is one of the indispensable concept through which the entire money market revolves. It is better understood that Re.1 today adds more value than Rs.10 tommorow, since the prospective earnings is uncertain and risky. So, Time value of money concept helps to discount that uncertainity and give probability for failures and success, thereby discounting the risk to a certain extent. Inspite, Capital Budgeting will assist how to evaluate the project, the returns, and at what rate it is to be reinvested, to cover the Cost of Capital. Discount rate is one of the input for evaluation, (formerly known to be the time value of money tool) will facilitate the company to take capital budgeting decisions. By doing this, the company may be in a position to decide on type of investments, tenure and the risk factor. Present value factor will bring the future cash flows to the present value by a loss factor.
Explain the factors detemimining working capital requirements of a firm?
The nature of the business, seasonality of production and the production cycles are some of the factors that determine the working capital requirements of a firm.
What is the disadvantage of budgeting?
Distortion is caused by cash budgets. Influence of non-financial factors will also affect the final decisions when it comes to cash budgets. Cash budgets are vulnerable to manipulations. The major disadvantage is that cash budget relies on estimates.
What is the amount capital in variety store?
The amount of capital necessary to open a variety store depends on a several factors. Real estate can be the biggest outlay, and one must also consider what and how much they want to stock. The required capital could be as little as a few hundred thousand up to $2 million.
What are theFinancial and non financial factors to be considered in international capital budgeting?
What are theFinancial and non financial factors to be considered in international capital budgeting
What is multinational capital budget?
Multinational capital budgeting refers to the process that multinational corporations use to evaluate potential investment projects across different countries. This involves assessing factors such as currency fluctuations, political risk, tax implications, and varying economic conditions. The goal is to determine the feasibility and profitability of investments in various markets, ensuring that capital is allocated effectively to maximize returns while managing risks. It often requires sophisticated financial modeling and a deep understanding of both local and global market dynamics.
What types of things are looked at when determining capital budgeting?
Capital budgeting is basically looking at a business and deciding if purchasing new equipment, computers, etc. is going to pay off in the long run and pay for itself. Some of the factors that are considered are as follows: rate of return, profitablility index, net present value, internal rate of return, and equivalent annuity.
What are the factors affecting multinational companies in global scenario?
inflations rates initial capital outlay tariffs balanca of exchange
Factors to be considered while estimating the working capital requirement of a manufacturing company?
factor to consider when estimate working capital in finacing project
Factors to be considered in the choice of a particular business?
The main two factors to be consider are the capital or labor. which may easily available and less expensive will have to be chosen.
What are the three factors that affect budgeting?
the 3 factors that influences a budget are unexpeted income, unexpected expenses and inflation...
Which of these fourth factors of production is considered the knowledge cultural values and ideas that help the economy grow?
social capital
What factors have led to the establishment of multinational enterprises MNEs?
Type your answer here... culture
Factors to be considered when establishing a farm?
factors to consider before estblishing a farm: - capital. - techinical know how. - land. - market. - source of inputs. - source of water . - source of power. - labour availability.
According to the classical school prices of factors and products are?
According to the classical school prices of factors and products are capital, fixed capital, working capital, financial capital and technological progress.
What is the major problem in using this approach to handle risk in capital budgeting?
The major problem in using a single approach to handle risk in capital budgeting is that it often oversimplifies complex uncertainties and fails to capture the full spectrum of outcomes. This can lead to misinformed decision-making as it may not adequately account for variability in cash flows, market conditions, or project-specific risks. Additionally, relying on one method can ignore qualitative factors and the interdependence of various risks, potentially resulting in unrealistic projections and financial losses.
