Why should the financial manager include opportunity cost but ignore sunk costs when evaluating a proposed capital investments? Give an example of each.

Q: How can engineers make capital-expenditure choices that are based on forecasting success?

A: As a result of this forecasting performance, engineers make capital-expenditure decisions will be…

Q: How are human and physical capital investment decisions similar? How do they differ? What determines…

A: Physical capital is the stock of equipment and structures used as an input to produce goods and…

Q: Should the economic engineers make capital-expenditure decisions based on a prediction about the…

A: The question is based on the concept of capital expenditure decision making, which is investment of…

Q: What's the difference between the capital asset pricing model and modified capital assset pricing…

A: Capital Asset Pricing Model CAPM describes the relationship between systematic risk and expected…

Q: Explain why sunk costs should not be included in a capital budgeting analysis but opportunity costs…

A: A sunk cost is the cost that has been incurred as a result of past events and such cost may not be…

Q: Why do come companies prefer to use discounting in their capital investment decisions?  What is a…

A: Capital Investment:-It is an investment that a company made to purchase its fixed assets or…

Q: What is the capital asset pricing model (CAPM)? What does it tell us about the required return on a…

A: The required rate of return of a security is the minimum return an investor will demand from the…

Q: how a failed capital project may shape the future strategy of investment capital.

A: Introduction: Capital projects are nothing but a long term capital intensive initiative aimed at…

Q: What is the weighted average cost of capital (WACC) and its significance?

A: Weighted average cost of capital (WACC): When a firm's weighted average cost of capital (WACC) is…

Q: What is an investment center manager's advise if the firm intends to adopt the return on investment…

A: This question explains about an investment center manager's advise if the firm intends to adopt the…

Q: the Capital Asset Pricing M

A: Explanation : In simple words, Capital asset pricing model for valuing the cost of capital contains…

Q: Explain why opportunity costs and externalities should be included in capital planning but not sunk…

A: A sunk cost is a cost that has been incurred as a consequence of previous events and which may not…

Q: Critically assess how a failed capital project may also shape the future strategy of investment…

A: Capital projects are nothing but a long-term capital-intensive initiative aimed at expanding on,…

Q: Based on the assumption efficient capital market is characterized by rationality and risk aversion,…

A: When a business attempts to maximize the wealth of their firm, they are really attempting to build…

Q: Discuss the Cost of capital approach ?

A: Cost of capital is the required return necessary to make a capital budgeting project, such as…

Q: In the case of the net present value technique, explain how the cost of capital is used as a…

A: The question tells about the net present value technique and  how the cost of capital is used as a…

Q: How do you call a strategy that separately examines capital market conditions and the investor's…

A: The strategy is called as “Integrated Asset Allocation Strategy”.

Q: Why is risk incorporated into capital budgeting and how is it incorporated into the process of…

A: Capital budgeting is the process of evaluating different investment projects that require capital…

Q: Which of the following are two methods of analyzing capital investment proposals that both ignore…

A: Which of the following methods of evaluating capital investment proposals? Following four methods…

Q: What information does the payback convey that is absent from the other capitalbudgeting decision…

A: Payback period method is a traditional method used in capital budgeting decisions which is used to…

Q: Explain the problem of a capital-investment?

A: For the financing of capital investment, generally, the company considers operating cash flow of its…

Q: Why do we use the overall cost of capital for investment decisions even when only one source of…

A: The question is based on the concept of Financial planning.

Q: What is the difference between capital budgeting decisions and capital structure decisions? Which of…

A: Capital budgeting: Capital budgeting is the process of evaluating different investment projects that…

Q: Is it ever appropriate or acceptable to use the payback method of evaluating capital investment…

A: Introduction: Capital budgeting is an investment criterion or decision making mechanism for…

Q: Relate the idea of cost of capital to the opportunity cost concept. Is the cost of capital the…

A: The total cost of financing current projects (or projects under consideration) will be the financial…

Q: Which combination of investment policy and financing policy related to working capital provides the…

A: A relaxed current asset investment policy is one under which relatively large amounts of current…

Q: Why might DCF techniques not lead to proper capital budgeting decisions?

A: Introduction: Capital budgeting is an investment criterion or decision making mechanism for…

Q: why is a risk analysis important to the capital investment decision making process?

A: Risk is the uncertainty or possibility of loss due to the decision in investment process. Of all the…

Q: Explain how differential weight to losses and gains effect investment decisions?

A: Prospect Theory assigns differential weight to losses and gains for making investment decisions.

Q: The calculation of a hurdle rate when looking capital expenditures involves looking at what…

A: Generally companies take up new projects only when the project passes the hurdle rate (HR). As the…

Q: What are the Factors That Complicate Capital Investment Analysis

A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: The weighted average cost of capital is used to determine whether or not a project should be done.…

A: Solution:- Weighted Average Cost of Capital means the minimum return which a firm should earn in…

Q: In capital budgeting decisions, are there reasons a company might choose to take a project that was…

A: Net present value (NPV) is value of all future cash flows discounted to the present value by either…

Q: What is a capital investment and why do companies need to evaluate whether to make the investment or…

A: Capital Investment:-It is an investment that a company made to purchase its fixed assets or…

Q: How do the engineers make capital-expenditure decisions based on prediction?

A: Capital-expenditure decision The process of decision making with regards to the investment to be…

Q: What are the two types of risk according to the Capital Asset Pricing Model? Which of the two types…

A: The Capital Asset Pricing Model (CAPM) describes the link between systematic risk and expected…

Q: A firm’s weighted average cost of capital should not do which one of the following? Group of answer…

A: Weighted average cost of capital means the cost of raising the various fund taking the amount of…

Q: Technically, the required return of an investment can be determined by determining the investments…

A: The required return on an investment is the return that is expected and assumed by an investor to be…

Interest Rate

When you deposit your money with the bank, the deposit earns you some extra money at the end of the specific period – something more than what you deposited. That amount of money that the bank pays you for keeping the money with the bank is the “interest” and the percentage at which the bank pays you for your amount is called the “interest rate”.