cashflowestimationandriskanalysis(英文版)(文件)
【正文】 types of risk generally highly correlated? Yes. Since most projects the firm undertakes are in its core business, standalone risk is likely to be highly correlated with its corporate risk, which in turn is likely to be highly correlated with its market risk. 12 29 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. Best 125,000 Perform a scenario analysis of the project, based on changes in the sales forecast. Assume that we are confident of all the variables that affect the cash flows, except unit sales. We expect unit sales to adhere to the following profile: Case Probability Unit sales Base 100,000 Worst 75,000 12 33 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. Is this project likely to be correlated with the firm’s business? How would it contribute to the firm’s overall risk? We would expect a positive correlation with the firm’s aggregate cash flows. As long as this correlation is not perfectly positive (., r ? 1), we would expect it to contribute to the lowering of the firm’s total risk. 12 37 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. 演講完畢，謝謝觀看！ 。 2023 by Harcourt, Inc. All rights reserved. Reevaluating this project at a 13% cost of capital (due to high standalone risk), the NPV of the project is $ . If the firm uses a +/3% risk adjustment for the cost of capital, should the project be accepted? 12 39 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. E(NPV)=.25($)+.5($)+.25($) E(NPV)= $. Use these scenarios, with their given probabilities, to find the project’s expected NPV, ?NPV, and CVNPV. ?NPV = [.25($$)2 + .5($$)2 + .25($$)2]1/2 ?NPV = $. CVNPV = $ /$ = . 12 35 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. What are the primary advantages and disadvantages of sensitivity analysis? ADVANTAGE: Sensitivity analysis identifies variables that may have the greatest potential impact on profitability. This allows management to focus on those variables that are most important. 12 31 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. What is market risk? The project’s risk to a welldiversified investor. Theoretically, it is measured by the project’s beta and it considers both corporate and stockholder div
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