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Different Risk-profile - Shareholders and Management
Shareholders will generally prefer high-risk-high return investments while they are diversified that is they have many investments and the collapse of one firm may have irrelevant effects upon their overall wealth.
Managers on the other hand, will prefer low risk-low return investment because they have a personal fear of losing their jobs whether the projects collapse. Like human capital is not diversifiable. This dissimilarity in risk profile is a cause of conflict of interest while shareholders will forego some profits whenever low-return projects are undertaken.
Net Present Value Method - Example Jeremy limited wishes to expand its output by purchasing a new machine worth 170,000 and installation costs are estimated at 40,000/=. In t
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Conduct research and explain the companies, their operations, locations, markets, and lines of business. Collect financial statements for the past three years, fiscal or calendar .
Acceptance Rule of Accounting Rate of Return or ARR ARR procedure will accept those projects whose ARR is higher rather than that set with management or with bank rate and it
Advantages of Stock Repurchase 1. It may be seen as a true signal since repurchase may be motivated with management belief that firm's shares are undervalued. It is true in in
PBP Reciprocal PBP expresses the profitability of a project in terms of years. It does not indicate any return as measure of investment. The PBP reciprocal has been utilized
1. Describe the similarities and differences in between an ordinary annuity, an annuity due, and perpetuity. Provide a methodical answer, including examples to demonstrate your po
Finance Functions The functions of Financial Manager can broadly be split into two: The Managerial Functions and The Routine functions. Managerial Finance Functions
Explain about the monetary role of banks. The Monetary Role of Banks: • A bank is a financial intermediary. • Bank reserves are the currency banks hold within their va
Example of Payback Period Method Suppose a project costs Sh.80,000 and will produce the following cash inflows as: Cash inflows Accumu
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