What techniques can be used to evaluate risks associated with different investment opportunities?© BrainMass Inc. brainmass.com October 24, 2018, 11:40 pm ad1c9bdddf
Please find my response below.
There are different ways to evaluate risks associated with different investment opportunities. One way to evaluate risk is to compare the volatility in cash flows of that investment with other investment opportunities. More the volatility, more the risk. This volatility can be measured using standard deviation of historic returns or of comparable projects. This standard deviation serves as a way to evaluate risk of ...
The solutions discusses the techniques that can be used to evaluate risks associated with different investment opportunities.
Capital Budgeting Scenarios
Using net present value, determine the proposal's appropriateness and economic viability.
Prepare a report explaining your calculations and conclusions. Answer the following in your report:
o Explain the effect of a higher or lower cost of capital on a firm's long-term financial decisions.
o Analyze the use of capital budgeting techniques in strategic financial management.
· Format your report according to APA standards.
Proposal C: New Advertising Program
A company wants to invest in a new advertising program. Using the NPV method of capital budgeting, determine the proposal's appropriateness and economic viability with the following information:
? The new program will increase current sales, $10 million, by 20%.
? The new program will have a profit margin is 5% of sales.
? The new program will have a 3-year effect.
? The new program will cost the company $200,000 in the first year.