Question Details

In what ways is the estimated net present value 


1. Uncertainty of Cash Flows. Using the capital budgeting framework discussed in this chapter,
explain the sources of uncertainty surrounding a proposed project in Hungary by a U.S. firm. In what ways is the estimated net present value of this project more uncertain than that of a similar project in a more developed European country?
2. Accounting for Risk. Your employees have estimated the net present value of project X to be
$1.2 million. Their report says that they have not accounted for risk, but that with such a large
NPV, the project should be accepted since even a risk-adjusted NPV would likely be positive. You
have the final decision as to whether to accept or reject the project. What is your decision?



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