(Practice Problems) Development

Should companies completely avoid high-risk projects? Explain.

What are the main constraints or obstacles to implementing the investment management concept?

Internal Rate of Return is used: a) To determine the interest rate at which benefits of a project are equivalent to its costs. b) To determine which investment to choose when one of two alternatives must be chosen. c) To determine the interest rate for an investment that yields no income. d) To choose an investment that necessary to preserve the operation of the business. e) To justify a “lost-leader” project of a strategic nature.

How a successful engineering project affects a firm's market value?

Write down the feasibility study of your project based on three main points i.e. financial, economical, technical and business perspective of the project in market? • Feasibility refers to viability • It is atechnique to determine the viability of a business problem or improvement opportunity • It tells us whether a project is worth the investment or not The study indicates that not every project is doable and hence; it is also not necessary that every project should be taken up

What calculation techniques do companies use to value risky investment projects? Provide detailed discussion of three such techniques with numerical examples.

What alternatives do companies have for evaluating alternative projects or investments?

Which of the following statements best explains how NPV can help decision makers?  Group of answer choices A positive NPV shows that a project is risk free and wealth enhancing. A negative NPV shows that a project is wealth enhancing A positive NPV shows that a project is wealth enhancing. A negative NPV shows that a project is wealth enhancing but of high risk

Which of the following theory is applicable to the following situation? A manager needs to raise funds to finance a new project and prefers to use internal financing. Group of answer choices signaling theory trade off theory MM Proposition pecking order theory

In pursuing one’s investment objective, which is specified in terms of return requirement and risk tolerance, one should bear in mind the constraints arising in the investment process. What could be these investment constraints? Describe with examples.

How can you know whether a project will be profitable? What purpose does TCO serve?

Assess the nature of the risks that an organisation can be exposed to when undertaking a new investment?

How should firms evaluate projects with different risks?

1) What is the company's WACC? 2) Should the company take the projects? Assume that the projects have the same risk as an average project for your firm. 3) If one project is depended on the other in a way that the company can only take both projects, should it take it?

Which of the following techniques for deciding on taking a project has the criteria for acceptance or rejection determined by the management of the firm? a. Payback b. Pl c. NPV d. IRR

a) Explain what an ethical dilemma is and provide an example of a situation where individuals were faced with an ethical dilemma in a real-world project. b) Provide an example of a project that has failed. Your example should include a summary of reasons why the project is considered to have failed, with specific reference to the project lifecycle and controls that could have been put in place at each phase of the project lifecycle, to minimise the likelihood of these failures occurring in the first place. c) A company manufactures a component which sells for £33. The variable cost associated with its manufacture is £17 per component. Fixed costs allocated total £128,000. Plot a graph to show the number of components the company needs to sell to break even (i.e. to cover the sum of the fixed and variable costs). d) Tuckman found that teams go through six key development phases. List the six phases of team development and provide a brief explanation of each.

Good managers not only identify and evaluate realoptions in projects—they also structure projects soas to create real options. Suppose a company isconsidering a project to build an electric generating plant. Name some real options that might bebuilt into the project, explain how they could beevaluated, and discuss their effects on the project’sNPV.

What are some programs that an entrepreneur can use to reduce risk?

Why do you think CFOs tend to look at strategic concerns before they look at the NPV of a project? If value creation means choosing projects with a positive NPV, what does strategic analysis achieve?

Should companies completely avoid high-risk projects?

Explain how you would evaluate the expected rate of return from the investment (purchasing a company) and the method to evaluate the investment decision. Assess the disadvantages and advantages of the investment method and why the method would provide the most accurate measure for the anticipated rate of return requirement. Justify your recommendation.

What is the value added by the design of the financing package? How does it alter both the return and the risk of the new project? Is it effective at reducing the project’s operating risks?

In each of the different stages in the development of a new venture, what are the different funding requirements? Which funding option is right for a finacial manager?