Question
Capital Budgeting Techniques for Risk Analysis : A company is evaluating two investment projects with different cash flow profiles and risk levels. Project A has
Capital Budgeting Techniques for Risk Analysis: A company is evaluating two investment projects with different cash flow profiles and risk levels. Project A has a higher expected return but also higher variability in cash flows compared to Project B. Using sensitivity analysis or scenario analysis, assess the impact of changes in cash flow projections and discount rates on the net present value (NPV) of each project. Discuss how risk analysis techniques help in making informed investment decisions and managing investment risks.
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