1.1 Discuss 12 principles of foundational corporate finance.
1.2 Compare and contrast accounting net income and cash flows.
1.3 Compare and contrast the market value of an asset or liability from the book value.
With respect to those projects with higher individual IRR's, how does this impact the outcome of their financing decisions? What is the relationship of risk associated with a higher IRR? How does this relationship reflect the 'Risk-Return Trade-Off' principle from Week 1?
The risk-return principle is that as projects or investments become riskier, the demand for a return is higher. This is due to the notion that certainty is better than non-certainty. A choice between a risky investment with the same return as a non-risky investment will result in the choice of the non-risky investment. It is only with the increase in the expected return of the ...
The solution examines corporate finance foundations. The expert compares and contrasts the market values of an asset or liability from the book values.