The following methods are used for risk analysis in capital budgeting sensitivity analysis this is also known as a what if analysis because of the uncertainty of the future if an entrepreneur wants to know about the feasibility of a project in variable quantities for example investments or sales change from the anticipated value . So before your business invests in new equipment projects machinery research development or expands existing products or replaces projects arm yourself with critical insight and conduct a professional risk analysis to weigh your capital budgeting forecast why risk analysis is an essential aspect in capital budgeting. The relationship between risk and capital budgeting and if they take a more risk averse stance they will make capital investment decisions that have a more guaranteed payoff on the other hand if they be more risk loving they will be attracted to the more risky investments for capital that they believe have a chance for higher payoff . Risk analysis in capital budgeting presentation pdf available february 2018 o capital budgeting decisions in volve cos ts and benefits extending over a longer time horizon. Discuss the concept of risk in investment decisions understand some commonly used techniques ie payback certainty equivalent and risk adjusted discount rate of risk analysis in capital budgeting focus on the need and mechanics of sensitivity analysis and scenario analysis highlight the utility and methodology simulation analysis
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