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126 Financial Management which it was accepted, as well as being subject to cost control procedures. Inflation and Capital Budge ...

Capital Budgeting Evaluation Techniques^127 Year PBDT Compo- unding Factor At 0.15 Revised PBDT (PBDT X Com. Fac.) Depre- ciatio ...

128 Financial Management return. Example 2.2 highlights that firms (conscious of protecting the real purchasing power of their o ...

Capital Budgeting Evaluation Techniques^129 substituting the values, (l + r) = 1.12/1.05 = 1.0667 r = 0.0667 or 6.67 per cent. o ...

130 Financial Management Risk is used to describe the type of situation in which there are a number of possible states of nature ...

Capital Budgeting under Risk and Uncertainties^131 risk situation is that the event is repetitive in nature and possesses a freq ...

132 Financial Management A look at the Figure 6.1 will make it crystal clear that dispersion of the probability distribution of ...

Capital Budgeting under Risk and Uncertainties^133 as best in all situations. The variety of techniques suggested to handle risk ...

134 Financial Management Procedure Fairly simple, sensitivity analysis consists of the following steps: Set up the relationship ...

Capital Budgeting under Risk and Uncertainties^135 Given the range and most likely value of basic variables, we can study the im ...

136 Financial Management 600 700 800 900 1000 P 100 200 300 400 500 600 -100 -200 -300 700 The same relationship is shown graphi ...

Capital Budgeting under Risk and Uncertainties^137 Evaluation Sensitivity analysis, a popular method for assessing risk, has cer ...

138 Financial Management Scenario Analysis In sensitivity analysis, typically one variable is varied at a time. If variables are ...

Capital Budgeting under Risk and Uncertainties^139 Best and Worst Case Analysis In the above illustration, an attempt was made t ...

140 Financial Management setting up a new flour mill near Bangalore. Based on Naveenís previous experience, the project staff of ...

Capital Budgeting under Risk and Uncertainties^141 what level of sales will the project have a zero NPV? To illustrate how the f ...

142 Financial Management independent of the cash flow for year i-r. Put differently, there is no relationship between cash flows ...

Capital Budgeting under Risk and Uncertainties^143 = 2 400 000 1 06 1 600 000 1 06 2 400 000 1 06 2 4 6 2 258 1 2 , , (. ) , , ( ...

144 Financial Management This probability is obtained by finding the area under the probability distribution curve to the left o ...

Capital Budgeting under Risk and Uncertainties^145 Step 2 Refer to the standard normal distribution table and find the probabili ...