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3 years ago

Capital budgeting is the process Question 2 options: used in sell or process further decisions.

Business

1 answer:

Kruka [31]3 years ago

4 0

Answer:

Capital budgeting is the process "of making capital expenditure decisions"

Explanation:

Capital budgeting is a planning process employed by a firm's management to evaluate if embarking on long-term investments (like purchase of a new machinery, replacement of old non-current assets, new product line, etc) are viable and profitable.

Decisions made by management must be informed decisions and one of the ways in which an investment decision can be evaluated to check if it is worthwhile is the capital budgeting process

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Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $120,000 or $300,000 with equal

Ivanshal [37]

Answer:

a. If you require a risk premium of 8%, how much will you be willing to pay for the portfolio?

the expected value of our portfolio = ($120,000 x 50%) + ($300,000 x 50%) = $210,000

the current market price of the investment = $210,000 / 1.13 = $185,840.71

discount rate = 5% + 8% = 13%

b. Suppose the portfolio can be purchased for the amount you found in (a). What will the expected rate of return on the portfolio be?

13%, it should be equal to the discount rate

c. Now suppose you require a risk premium of 15%. What is the price you will be willing to pay now?

the current market price of the investment = $210,000 / 1.21 = $175,000

discount rate = 5% + 15% = 20%

d. Comparing your answers to (a) and (c), what do you conclude about the relationship between the required risk premium on a portfolio and the price at which the portfolio will sell?

the higher the risk premium, the lower the market price of the portfolio

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3 years ago

Which qualifications are most helpful for Foreign Service Careers? Check all that apply.

r-ruslan [8.4K]

The foreign languages are Brazilian and

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3 years ago

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Discuss which financial management practices are least effective in creating and monitoring an operating budget.

Vinil7 [7]

Top down/bottom up budgets, lack of control, poor inventorying, lack of staff investment, over control are the least effective financial management practices in creating and monitoring an operating budget.

The operating budget includes the expenditures and revenues generated by the company's daily business functions. The operating budget focuses on operating expenses, such as the cost of goods sold in the market, also known as the cost of sold goods (COGS), and revenue or income. COGS is the cost of direct labor and direct materials used in the production process.

The operating budget also includes overhead and administration costs that are directly related to manufacturing goods and providing services. However, capital expenditures and long-term loans will not be included in the operating budget. Budgets for sales, production process or manufacturing, labor, overhead, and administration are a few examples of frequently utilized operating budgets.

Learn more about operating budget here:

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2 years ago

Consider the market for running shoes. draw a firm's average total cost curve with no advertising. label it atc0. draw the fir

Anarel [89]

I believe it’s b..... hope this helps pls tell me if I’m wrong! <3

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3 years ago

Money markets are markets for_________.

Mila [183]

Answer:

e. Short-term debt securities such as Treasury bills and commercial paper.

Explanation:

The money market is a branch of financial markets that trade in short-term, high liquidity debt instruments. The money markets create an opportunity for investors and borrowers to buy and sell different types of short term financial securities. The short-term securities maturity period ranges from one day to less than 12 months.

The securities that trade in market markets are called money market instruments. They include commercial papers, Eurodollar deposits, treasury bills, federal agency notes, and certificates of deposit. The money markets are important because they enable companies with temporary financial shortfalls to borrow money by selling money market instruments. They also give companies with cash surplus a platform to invest and earn interests.

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3 years ago