Projects with different risks

Related BrainMass Solutions

• What are major areas of risk in financial management? How might the company adjust for projects of differing risk in the approval process?

  It allows an analyst to compare different projects with different risks through the adjustment of each of the project's discount rate used in computing for the net present value.

• NPV and discount rate

  Hence different projects have different risks. Therefore its appropriate to have different discount rates for different projects.

• Project Manager, Unforeseen Risks and Planning

  62385 Project manager, unforeseen risks and planning 1. Today's organizations must recognize that the profile of enterprise-level projects requires examination of new and different risk factors.

• Risks and Uncertainty Related to Capital Budgeting

  The future is uncertain and full of risks. Longer the period of project, greater may be the risk and uncertainty. The financial forecasts may not come true. Hence different project having different risk levels should have different discount rate.

• A company has an equal number of low-risk projects, average-risk projects, and high-risk projects

  The company's CFO argues that, even though the company's projects have different risks, the cost of capital for each project should be the same because the company obtains its capital from the same source.

• Should a firm use the same cost of capital for all its investments?

  Different investmnet projects have different risks associated with it. Therefore, the required return from that project should commensurate with the risk class the project belongs to.

• Tools for project risk management

  All can be used for scheduling projects under uncertainties. It is possible to stimulate different cost and schedule outcomes in projects. They can build customized reports and allow sharing of project data.

• BRIC - Country Risk - Capital Budgeting

  Hence, criteria during the capital budgeting process is different for countries with different level of country risks. Reference: http://www.snee.org/filer/papers/282.pdf.

• Cost of capital

  Within the segments, there is also a possibility that different projects may have different risk. So we need to adjust the segment cost of capital to the differences in the risks of the project.