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146 Financial Management Illustration In real life situations, simulation is done only on the computer because of the computatio ...

Capital Budgeting under Risk and Uncertainties^147 digit random numbers, one for the annual cash flow and the other for the proj ...

148 Financial Management Evaluation An increasingly popular tool of risk analysis, simulation offers certain advantages: l Its p ...

Capital Budgeting under Risk and Uncertainties^149 begin with, it need not worry about a weak market and the consequent low leve ...

150 Financial Management of Brealey and Myers.î Decision trees are like grapevines; they are productive only if vigorously prune ...

Capital Budgeting under Risk and Uncertainties^151 If he conducts a seismic experiment, he can learn about the underlying soil s ...

152 Financial Management C 11 C 1 Dry C 12 Wet C 13 C 4 C 5 C 3 C 21 Drill D 22 Do not drill D 2 C 21 Drill D 32 Do not drill D ...

Capital Budgeting under Risk and Uncertainties^153 Figure 6.15: Decision Tree Starting at the right-hand end of the tree, the e ...

154 Financial Management On the basis of the above information, the alternatives selected at the decision points D 2 , D 3 and ...

Capital Budgeting under Risk and Uncertainties^155 Figure 6.16: Decision Tree Following the above decision strategy, the decisio ...

156 Financial Management l The probabilities and the cash flows associated with various outcomes can be specified at the beginni ...

Capital Budgeting under Risk and Uncertainties^157 diversification. Stable earnings and cash flows enable a firm to attract tale ...

158 Financial Management 0 20,000 40,000 Net present Value Probability 1.0 1.2 1.4 Probability index Probability A' B shown in E ...

Capital Budgeting under Risk and Uncertainties^159 that is acceptable to management. This is quite understandable. If the profit ...

160 Financial Management At= expected cash flow for year t rk = risk adjusted discount rate for project k Example The expected c ...

Capital Budgeting under Risk and Uncertainties^161 is called the certainty coefficient. It reflects primarily two things: variab ...

162 Financial Management Replacement investments Expansion investments New product investments Research and development investme ...

Capital Budgeting under Risk and Uncertainties^163 also has to be accepted that the calculation has to include a factor to allow ...

164 Financial Management the public involved the sampling process to really help the decision maker the population sampled must ...

Working Capital Management^165 Concept, Need & Determinants Working capital could be defined as the portion of assets used i ...