Cash Flow Estimation and Risk Analysis: Real Options doesn't always lead to proper capital budgeting decisions because capital budgeting projects are not take positive actions after the investment has been made to alter a project's cash flows. These opportunities are re future action. Types of real options include abandonment, investment timing, expansion, output flexibility, and inpu expected profitability, Select- their calculated NPVs, and Select their risk. The abandonme nt option is the option to shut down a project if operating cash flows turn out to be lower than expe tree, which is a diagram that lays out different branches that are the result of different decisions made or the result consider the project with and without the option. The option value is calculated as the difference between the expec project without the option is negative and the NPV of the project with the option is positive, then the ontion valiue acrountod for in DCapital Structure and Leverage: Business and Financial Risk Select- another and also among firms in a given industry. In addition, it can also change over time. A commonly used measure of -Select- 3 risk is the standard deviation of the firm's return on invested capital (ROIC). Rer structure, so the standard deviation of ROIC measures the underlying risk of the firm -Select-3 considering the effects of including: competition, demand variability, sales price variability, input cost variability, product obsolescence, foreign risk ex risk is the single most important determinant of capital structure, and it is the riskiness inherent in the firm's -which is defined as the extent to which fixed costs are used in a firm's operations. These factors are -Select managerial decisions. 3 is the extent to which fixed-income securities (debt and preferred stock) are used in a firm's capital str -Select- risk, over and above the firm's basic -Select- 3 risk, resulting from the use of -Select- 3 leverage. The use of debt conde using debt increases the expected rate of return for an investment. However, debt also increases risk to the common stockhoi increases risk. When a firm is determining its optimal capital structure, it needs to balance these positive and negative effects Give the correct response to the following questions. Company X has a higher degree of financial risk than Company Y. Company X can offset this by lowering its operating leverage -Select- Firm A has more business risk than Firm 8, but they both have the same total risk. Which of the following statements must be t a. In order to offset its higher business risk, Firm A will increase its operating leverage so that its total risk is the same as Firm b. Because Firm A has more business risk than Firm B, its debt ratio will be greater than Firm B's C. Because Firm B has less business risk than Firm A. its debt ratio will halnuia Cash Flow Estimation and Risk Analysis: Real Options doesn't always lead to proper capital budgeting decisions because capital budgeting projects are not take positive actions after the investment has been made to alter a project's cash flows. These opportunities are re future action. Types of real options include abandonment, investment timing, expansion, output flexibility, and inpu expected profitability, Select- their calculated NPVs, and Select their risk. The abandonme nt option is the option to shut down a project if operating cash flows turn out to be lower than expe tree, which is a diagram that lays out different branches that are the result of different decisions made or the result consider the project with and without the option. The option value is calculated as the difference between the expec project without the option is negative and the NPV of the project with the option is positive, then the ontion valiue acrountod for in DCapital Structure and Leverage: Business and Financial Risk Select- another and also among firms in a given industry. In addition, it can also change over time. A commonly used measure of -Select- 3 risk is the standard deviation of the firm's return on invested capital (ROIC). Rer structure, so the standard deviation of ROIC measures the underlying risk of the firm -Select-3 considering the effects of including: competition, demand variability, sales price variability, input cost variability, product obsolescence, foreign risk ex risk is the single most important determinant of capital structure, and it is the riskiness inherent in the firm's -which is defined as the extent to which fixed costs are used in a firm's operations. These factors are -Select managerial decisions. 3 is the extent to which fixed-income securities (debt and preferred stock) are used in a firm's capital str -Select- risk, over and above the firm's basic -Select- 3 risk, resulting from the use of -Select- 3 leverage. The use of debt conde using debt increases the expected rate of return for an investment. However, debt also increases risk to the common stockhoi increases risk. When a firm is determining its optimal capital structure, it needs to balance these positive and negative effects Give the correct response to the following questions. Company X has a higher degree of financial risk than Company Y. Company X can offset this by lowering its operating leverage -Select- Firm A has more business risk than Firm 8, but they both have the same total risk. Which of the following statements must be t a. In order to offset its higher business risk, Firm A will increase its operating leverage so that its total risk is the same as Firm b. Because Firm A has more business risk than Firm B, its debt ratio will be greater than Firm B's C. Because Firm B has less business risk than Firm A. its debt ratio will halnuia