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pochemuha
3 years ago
9

5. Risk analysis in capital budgeting Projects differ in risk, and risk analysis is a critical component of the capital budgetin

g process. Consider the case of United Recycling Inc.: United Recycling Inc. is one of the largest recyclers of glass and paper products in the United States. The company is looking into expanding into the cardboard recycling business. The company’s CFO has performed a detailed analysis of the proposed expansion. The selling price of recycled cardboard can fluctuate dramatically, depending on the market conditions. By creating models that used different assumptions for the selling price of recycled cardboard but keeping all other inputs in the model the same, the CFO demonstrated the effect of fluctuations in the price of recycled cardboard. Based on the information given, determine which of the statements is correct. The company’s CFO was conducting a sensitivity analysis on the project’s financial model. The company’s CFO performed a scenario analysis on the project’s financial model. Evaluating risk is an important part of the capital budgeting process. Which of the following is measured by its effect on the firm’s beta coefficient? Risk-adjusted cost of capital Market, or beta, risk Corporate, or within-firm, risk Stand-alone risk When dealing with , diversification is totally ignored.
Business
1 answer:
stira [4]3 years ago
5 0

Answer:

A. Market, or beta, risk

Explanation:

i.e when the CFO adjusts the cost per ton of processing the cardboard, the project’s NPV will decrease.

Solution 2 :- The correct answer is (B) I.e Corporate or with in firm risk

a project's risk to the corporation as opposed to its investors

Solution 3 :- Stand alone risk

Stand alone risk is measured by the variability of the project's expected returns - diversification is totally ignored

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The following information pertains to Rik Co.'s two employees: Name Weekly salary Number of weeks worked in 2005 Vacation rights
Lapatulllka [165]

Answer: $1600

Explanation:

From the information given, it can be noted that while Ryan is vested, on the other hand, Todd isn't vested.

Therefore, since the vacation is for two weeks, the amount of vacation expense and liability should be reported will be for Ryan alone and this will be:

= $800 × 2

= $1600

In this case, service has already been rendered ans there's accumulated rights, therefore a vacation expense and liability of $1600 should be reported.

8 0
3 years ago
An increase in the real wage would result in a:________. a. shift of the labor demand curve, causing an increase in the number o
barxatty [35]

Option C

An increase in the real wage would result in a: movement along the labor demand curve, causing a decrease in the number of workers hired by the firm.

<u>Explanation:</u>

The wage rate is circumscribed by the crossing of supply and demand for labor. The demand curve depends on the marginal product of labor and the cost of the good labor originates.

A variation in the wage or payroll will end in a shift in the amount necessitated of labor. If the wage rate increases, organizations will require to hire fewer employees. The quantity of labor demanded will decline, and there will be a movement skyward on the demand curve.

5 0
3 years ago
Assume Evco, Inc., has a current price of $50 and will pay a $2 dividend in one year, and its equity cost of capital is 15%. Wha
gtnhenbr [62]

Answer:

The expected price after 1 year would be$55.5

Explanation:

According to the given data,

Price of the stock (Po) = $50

Dividend after 1year (D1) = $2

Equity cost of capital (KE) =15%

The formula for calculating the price after 1 year i.e.,(P1 ) is

                         

                          Po = (D1 + P1 )/ 1+KE                                      $50= ($2 + P1) / (1+0.15)

                        P1 = [$50(1.15)] - $2 = $55.5

6 0
3 years ago
If you have identified a risk you have
almond37 [142]

The correct answer is obviously, You recognized that it exists, i have no idea what they were smoking when they wrote this question.

6 0
3 years ago
Read 2 more answers
Variable Costing—Sales Exceed Production The beginning inventory is 14,500 units. All of the units that were manufactured during
blagie [28]

Answer:

a. Variable costing income from operations <u>is greater than </u>absorption costing income from operations.

b. $870,000

Explanation:

a. Under Variable costing, only the variable manufacturing costs are apportioned to the units produced.

Cost under Variable costing are;

= 114 * 14,500

= $‭1,653,000‬

Under Absorption Costing, both fixed and variable costs are apportioned to the units produced.

Cost therefore is;

= (114 + 60) * 14,500

= $‭2,523,000‬

Variable costing income from operations is greater than absorption costing income from operations because Absorption costs yields more cost.

b.= Absorption cost - Variable cost

= ‭‭2,523,000‬ - 1,653,000‬

= $870,000

<em>Variable costing income from operation will be $870,000 higher than Absorption costing income from operations.</em>

5 0
3 years ago
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