6. What are the primary advantages and disadvantages of applying simulation to capital budgeting risk analysis?...
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6. What are the primary advantages and disadvantages of applying simulation to capital budgeting risk analysis? 7. Computer simulation is used to generate a large number of possible outcomes for an investment project. Most firms invest in a particular project only once, however. How can a computer simulation model be helpful to the typical decision maker who is making a one-time-only investment decision? 8. On average, the expected value of returns from each $1 of premiums paid on an insurance policy is less than $1; this is due to the insurance company's administrative costs and profits. In spite of this fact, why do so many individuals and organizations purchase insurance policies? 9. Describe how certainty equivalent cash flow estimates can be derived for individual project cash flows. 6. What are the primary advantages and disadvantages of applying simulation to capital budgeting risk analysis? 7. Computer simulation is used to generate a large number of possible outcomes for an investment project. Most firms invest in a particular project only once, however. How can a computer simulation model be helpful to the typical decision maker who is making a one-time-only investment decision? 8. On average, the expected value of returns from each $1 of premiums paid on an insurance policy is less than $1; this is due to the insurance company's administrative costs and profits. In spite of this fact, why do so many individuals and organizations purchase insurance policies? 9. Describe how certainty equivalent cash flow estimates can be derived for individual project cash flows.
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