Questions from Financial Management

Q: One of the problems of using simulation to incorporate risk into capital

One of the problems of using simulation to incorporate risk into capital budgeting is related to the idea that the probability distributions of successive cash flows usually are not independent. If t...

Q: Give a verbal definition of risk that's consistent with the way we

Give a verbal definition of risk that's consistent with the way we use the word in everyday life. Discuss the weaknesses of that definition for financial theory.

Q: Rationalize the appropriateness of using the cost of capital to analyze normally

Rationalize the appropriateness of using the cost of capital to analyze normally risky projects and higher rates for those with more risk.

Q: China refuses to allow its currency, the yuan, to float

China refuses to allow its currency, the yuan, to float on international currency exchanges. Why is that a problem for the United States?

Q: Projects A and B have approximately the same NPV. Their initial

Projects A and B have approximately the same NPV. Their initial outlays are similar in size. Project A has early positive cash flows, and little or nothing is expected to come in later on. Project...

Q: Suppose the present value of cash ins and outs is very close

Suppose the present value of cash ins and outs is very close to balance for a project to build a new $50M factory, so that the NPV is +$25,000. The same company is thinking about buying a new trailer...

Q: Think about the cash flows associated with putting $100,000

Think about the cash flows associated with putting $100,000 in the bank for five years, assuming you draw out the interest each year and then close the account. Now think about a set of hypothetical c...

Q: What is it about the cash flows associated with business projects that

What is it about the cash flows associated with business projects that makes the NPV profile slope downward to the right? Would the NPV profile of any randomly selected set of positive and negative fl...

Q: Compare the cost of capital concept with the idea of the required

Compare the cost of capital concept with the idea of the required return on a stock investment made by an individual. Relate both ideas to the risk of the investment. How would a very risky investme...

Q: After the break in the MCC caused by using up retained earnings

After the break in the MCC caused by using up retained earnings, the schedule can be expected to remain flat indefinitely. Is this statement right or wrong? If wrong, explain what can be expected to...