Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed


Chapter 13 outlines five approaches used to recognise risk in capital budgeting 1



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13.10
Chapter 13 outlines five approaches used to recognise risk in capital budgeting
1
Varying the required payback time
2
Adjusting the required rate of return
3
Adjusting the estimated future cash flows
4
Sensitivity (‘what-if’) analysis
5
Estimating the probability distribution of future cash inflows and outflows for each project.
13.11
No. Discounted cash-flow analysis applies to both for-profit and not-for-profit organisations. Not-for-profit organisations must also decide which long-term assets will accomplish various tasks at the least cost. Not-for-profit organisations also incur an opportunity cost of funds.

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