Explain various types of project risks in capital budgeting

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Question 1 - Explain the various types of project risks in capital budgeting with examples? And indicate how these risks can be mitigated?

Question 2 - Honda Motors is assessing a project that its expected cash flows is as follows. Year Project Cash Flow 0 -$700 million 1 200 million 2 370 million 3 225 million 4 700 million The weighted average cost of capital of the project is 10 percent. Compute the project's discounted payback?

Question 3 - NamProducts is thinking a new project that creates a new laundry washing powder, GEMO. The company estimates that the NPV of the project is R3, 000,000, but this does not consider that the new washing powder will reduce the revenues received on its existing washing powder products. The company estimates that if it develops GEMO the company will lose R500, 000 in after-tax cash flows during each of the next 10 years because of the cannibalization of its existing products. NamProducts WACC is 10 percent. What is the net present value (NPV) of undertaking GEMO after considering externalities?

Reference no: EM132850288

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