What are the Flaws of Payback Screening?

Q: What are the other alternatives eliminated by the method of payback screening method?

A: Following are the other alternatives eliminated by the method of payback screening method: The…

Q: What are the benefits and Flaws of Payback Screening?

A: The payback period alludes to what extent it takes for a speculator to hit breakeven to recoup the…

Q: Outline the weaknesses of sensitivity analysis

A: Sensitivity analysis uses in capital budgeting for measuring the risk in project. It helps in…

Q: What determines the acceptable level of Detection Risk?

A: Detection Risk:   It is a chance that an auditor will fail to identify any material misstatement…

Q: Explain the types of risk?

A: Introduction: There is a risk involved in any company decision, and in personal life decisions. In…

Q: What are the benefits of Payback Screening?

A: The business has multiple options to invest in. It is vital to opt for the correct option of…

Q: Is a method of screening out in certain situations an unacceptable investment alternative?

A: Capital budgeting is the technique that is used in business to determine the best investment…

Q: What are the shortcomings of the internal rate of return criterion?

A: Solution- Internal Rate of Return (IRR)-      The Internal Rate of return (IRR) is that the discount…

Q: Why is the variance (or standard deviation) used as a measure of risk? What are the advantages and…

A: Reasons of utilizing variance as a risk measure: While consider a lesser risk in investment, fewer…

Q: What detail would a decision maker require to analyse a dilemma with the expected value? What…

A: Settling on choices is surely the main undertaking of an administrator and it is regularly an…

Q: What can be understood by abnormal return?

A: Note firstly we understand what is meaning of abnormal return. Basic meaning of abnormal return is…

Q: What is the initial cost of setting up the "stop-loss"  strategy?

A: The Stop-loss strategy is very useful which helps the investors to protect in the market, as the…

Q: Describe the method of Payback Screening?

A: Answer: The company has several investment opportunities. It is vital that you opt for the right…

Q: What are the appealing qualities of Payback Screening?

A: The payback method is the simplest way of checking the viability of the project. The payback method…

Q: What is the principal objection to the payback method?

A: The Payback period is one of the traditional or non-discounting techniques of Capital budgeting. It…

Q: What is the criticism for using SMB and HML as risk factors?

A: The Fama and French Three-Factor Model (or Fama French Model for short) is an asset pricing model…

Q: What is the payback method? What are its main strengths and weaknesses?

A: Explain the meaning of the payback method.   The payback period is the expected time period which is…

Q: What are the two primary factors that are difficult to estimate in sensitivity analysis?

A: Answer: Sensitivity analysis is commonly used in determining the interactions in a system or even a…

Q: Why is the additional risk not taken without expected additional return?

A: The risk-return tradeoff takes note of that the potential return increments with an expansion in…

Q: What is the risk of assessing Control Risk too low?

A: Definition:   Tests of controls: Tests of controls form the part of audit procedures to be…

Q: Is funding a type of risk?

A: Funding means providing the funds to the party and charging interest rates from them. Firms need…

Q: How does/can a financial intermediary reduce the risk facing them due to Adverse Selection?

A: The question is based on one of the key issue in financial market, banking industry,  about the…

Q: How weak reserch culture have an affect on Low potential investment? Explain in detail.

A: The low potential investment is also known as the low-risk investment. It refers to the investment…

Q: What should occur when a low level of Detection Risk is acceptable?

A: Detection risk is the risk that procedures performed to reduce audit risk will not detect a material…

Q: what is the difference between BL and TB models?

A: BL model stands for Black-Litterman model, which is a technique that is used to create investment…

Q: What is the payback screening?

A: Payback method: Payback period is the expected time period which is required to recover the cost of…

Q: What are the differences between bottom-up and top-down approaches to security valuation? What are…

A: A top-down method to security evaluation starts with an examination of the worldwide and national…

Q: What are some criticisms of the payback method?

A: Payback Period: Payback period is the period in which the project recovers its initial cost of the…

Q: What is the major disadvantage of the high-low method?

A: High-low method: High-low method is a method of calculating the variable cost and the fixed cost of…

Q: What is the Allowable Risk of Over-reliance?

A: Auditor has to test the account balances and classes of transactions and has to do both control…

Q: What is the iceberg effect? How can CASE tools help to minimize this phenomenon?

A: The Iceberg Principle or Iceberg Theory is a hypothesis that proposes that we can't see or recognize…

Q: What do you mean by null hypothesis, how to test the hypothesis give the best examples?

A: In common parlance, hypothesis is an assumption regarding anything and that assumption is based on…

Q: Explain risk aversion

A: Introduction: Risk can be characterized in terms of the uncertainty of future consequences resulting…

Q: What are the weaknesses of the payback method?  What other options do you have?

A: Pay back period is period required to recover initial amount of investment.

Q: Explain Prepayment Penalties?

A: Prepayment penalties are those penalties that lender charges from the borrower if borrower…

Q: What is the risk of assessing Control Risk too high?

A: Control risk refers to the probability of financial statements that were considered wrongly stated…

Q: Why is it important to remember that payback screening is not an end in itself?

A: The payback period is defined as a number of years takes by a project to recover the initial cost of…

Q: What is a goingconcern problem? What factors can contribute to such aproblem?

A: Given: To analyse about the going concern problem and its factors contribution as follows,

Q: What are the weaknesses of the payback method?

A: Payback period is the amount of time required for firm to recover its initial investment in projects…

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.