1. Concepts used in cash flow estimation and risk analysis You can come across different situations...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. Concepts used in cash flow estimation and risk analysis You can come across different situations in your life where the concepts from capital budgeting will help you in evaluating the situation and making calculated decisions. Consider the following situation: The following table contains five definitions or concepts. Identify the term that best corresponds to the concept or definition given. Concept or Definition The risk of a project without factoring in the impact of diversification The cash flow at the end of the life of the project A risk analysis technique that measures changes in the internal rate of return (IRR) and net present value (NPV) as individual variables are changed Aa Aa An example of externality that can have a negative effect on a firm Creates value for a company because it gives the company the right but not the obligation to take future action to increase its cash flows Term The owner of Café Bakka is considering investing in new point-of-sale technology. He spent $10,000 on his current point-of-sale system five years ago. The new point-of-sale technology will cost $25,000, but it will dramatically improve the speed at which his counter staff will be able to take orders; it will also reduce the owner's administrative work. How should the owner account for the cost of the current point-of-sale technology when performing his capital budgeting analysis to determine whether or not to purchase the new point-of-sale technology? O He should include half of the cost of the current point-of-sale system when evaluating the cost of the new point-of-sale system. O He should include the cost of the current point-of-sale system as part of the cost of the new point-of-sale system. O He should ignore the cost of the current point-of-sale system when evaluating the cost of the new point-of-sale system. A large soft-drink company currently produces regular cola and diet cola. It is considering introducing a new soft drink that tastes like regular cola but has zero calories like the diet cola. The new zero-calorie drink that tastes like regular cola is most likely to produce externality. 1. Concepts used in cash flow estimation and risk analysis You can come across different situations in your life where the concepts from capital budgeting will help you in evaluating the situation and making calculated decisions. Consider the following situation: The following table contains five definitions or concepts. Identify the term that best corresponds to the concept or definition given. Concept or Definition The risk of a project without factoring in the impact of diversification The cash flow at the end of the life of the project A risk analysis technique that measures changes in the internal rate of return (IRR) and net present value (NPV) as individual variables are changed Aa Aa An example of externality that can have a negative effect on a firm Creates value for a company because it gives the company the right but not the obligation to take future action to increase its cash flows Term The owner of Café Bakka is considering investing in new point-of-sale technology. He spent $10,000 on his current point-of-sale system five years ago. The new point-of-sale technology will cost $25,000, but it will dramatically improve the speed at which his counter staff will be able to take orders; it will also reduce the owner's administrative work. How should the owner account for the cost of the current point-of-sale technology when performing his capital budgeting analysis to determine whether or not to purchase the new point-of-sale technology? O He should include half of the cost of the current point-of-sale system when evaluating the cost of the new point-of-sale system. O He should include the cost of the current point-of-sale system as part of the cost of the new point-of-sale system. O He should ignore the cost of the current point-of-sale system when evaluating the cost of the new point-of-sale system. A large soft-drink company currently produces regular cola and diet cola. It is considering introducing a new soft drink that tastes like regular cola but has zero calories like the diet cola. The new zero-calorie drink that tastes like regular cola is most likely to produce externality.
Expert Answer:
Answer rating: 100% (QA)
1 The risk of a project without factoring in the impact of diversification Answer Standalone rise Standalone risk represents the risks created by a sp... View the full answer
Related Book For
Financial Management for Public Health and Not for Profit Organizations
ISBN: 978-0132805667
4th edition
Authors: Steven A. Finkler, Thad Calabrese
Posted Date:
Students also viewed these finance questions
-
A Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would have an initial lower cost but would require a significant expenditure for rebuilding...
-
Oklahoma Clinic is considering investing in new heart-monitoring equipment. It has two options: Option A would have an initial lower cost but would require a significant expenditure for rebuilding...
-
Taos Clinic is considering investing in new heart-monitoring equipment. It has two options: Option A would have an initial lower cost but would require a significant expenditure for rebuilding after...
-
Wilburton Hospital is investigating the possibility of investing in new dialysis equipment. Two local manufacturers of this equipment are being considered as sources of the equipment. After-tax cash...
-
Amazon.com, Inc., is well known today as an online marketplace for books, music, and other products. Although the increase in its stock price was initially meteoric, it was some years before the...
-
Yadier Company completed its first year of operations on December 31, 2011. Its initial income statement showed that Yadier had revenues of $192,000 and operating expenses of $78,000. Accounts...
-
Petitioner Christy Brzonkala met respondents Antonio Morrison and James Crawford at a campus party at Virginia Polytechnic Institute (Virginia Tech), where they were all students. At the party, the...
-
DeLong Corporation was organized on January 1, 2014. It is authorized to issue 10,000 shares of 8%, $100 par value preferred stock, and 500,000 shares of no-par common stock with a stated value of $2...
-
23 Consider the following Java code: What will be printed when the following code is executed: new Cat().eat(); ? public class Animal ( } public void eat () { System.out.println("Animal is eating");...
-
A fuel oil is analyzed and found to contain 85.0 wt% carbon, 12.0% elemental hydrogen (H), 1.7% sulfur, and the remainder noncombustible matter. The oil is burned with 20.0% excess air, based on...
-
A firm has $1,000 million in debt outstanding on the books, rated AA (carrying a yield to maturity of 8%). The beta of the stock is 1.05, and there were 100 million shares outstanding (trading at $35...
-
5. A cone of a vertex angle 2a = 60 rolls without slippage over the plane with constant precession velocity (ang. velocity w = 2 rad/s). In time t=0 point P starts motion along the slant from the...
-
1. A 2-dimensional (x-y), steady, incompressible flow is described by Cartesian velocity components u, v: u = x and v = -y. o Write a concise, technically precise, verbal description of how the...
-
All these thermodynamic calculations can make you very hungry, right? Why don t you prepare yourself a little bit of yummy ramen...? As you stand on your Q = 2 kW stove watching the water boil at tc...
-
1. Sketch the following paths on both p-v diagram and T-s diagram by assuming ideal gas. Path 1-2: isobaric process with decreasing volume Path 2-3: constant volume process with increasing pressure...
-
Mechanical power (Pm) will be: (a) 93.03 W (b) 20.93 W (c) 22.5 W (d) Non of the above in Performance of a Positive Displacement Pump test, the pump used (a) Piston Pump (b) Vane Pump (c) Gear Pump...
-
For the power system shown, calculate the complex power supplied from the source. Note that 220 V is an rms value. 220 V, 60 Hz 124/0 2 20-j25 92 90+j80 92
-
Write the binomial probability in words. Then, use a continuity correction to convert the binomial probability to a normal distribution probability. P(x 110)
-
Duncombe Village Golf Course is considering the purchase of new equipment that will cost $ 1,250,000 if purchased today and will generate the following cash disbursements and receipts. Should...
-
Should all variances be investigated?
-
Match the following terms with the most correct statement below. a. Debt service fund b. Component units c. Encumbrance d. Proprietary fund e. Internal service funds f. Special revenue fund g....
-
The relativity of simultaneity. Two clocks are placed at rest on the \(x^{\prime}\) axis of the primed frame, clock A at \(x^{\prime}=0\) and clock B at \(x^{\prime}=L_{0}\). They are therefore a...
-
A primed frame moves at \(V=(3 / 5) c\) relative to an unprimed frame. Just as their origins pass, clocks at the origins of both frames read zero, and a flashbulb explodes at that point. Later, the...
-
Synchronized clocks A and B are at rest in our frame of reference, a distance five light-minutes apart. Clock \(\mathrm{C}\) passes \(\mathrm{A}\) at speed (12/13) \(c\) bound for \(\mathrm{B}\),...
Study smarter with the SolutionInn App