--%>

Capital budgeting analysis

State some of the problems which may enter into capital budgeting analysis in case project debt is computed rather than borrowing capacity made by the project?

E

Expert

Verified

If the project debt is greater as compared to the borrowing capacity formed by capital project, and tax shields on actual new debt which are used during the analysis, APV will be overstated forming the project appear more attractive than it actually is.

   Related Questions in Financial Accounting

  • Q : How Eurocurrency is formed Explain how

    Explain how the Eurocurrency is formed.

  • Q : Conglomerate expansion Evaluate the

    Evaluate the given statement: “Firm may decrease its currency exposure by diversifying across the different business lines”.

  • Q : International portfolio for buying

    Why it is easier for an investor willing to diversify his portfolio internationally for buying depository receipts instead of actual shares of the company?

  • Q : What is the equivalent rate A bank

    A bank quotes an interest rate of 13.5% per annum with quarterly compounding. What is the equivalent rate with (a) continuous compounding and (b) annual compounding?

  • Q : Hedgers and Speculators Explain hedgers

    Explain hedgers and speculators are two types of economic agents required for a derivatives market to function.

  • Q : Trading A CD/$ bank trader is presently

    A CD/$ bank trader is presently quoting a small figure bid-ask of 35-40, while rest of the market is trading at the CD1.3436-CD1.3441.  Specify what all is implied about trader’s beliefs by his prices?

  • Q : Problem on National income Providing

    Providing reasons, describe the treatment assigned to the following which estimates national income.(i) Family members working freely on farm owned by family.(ii) The Payment of interest on borrowings through general government.

  • Q : A technically oriented software design

    Design: For this assignment you are to produce, one per group, a technically oriented software  design document. As the scope of the project is quite small and basically encompasses an extension to an existing

  • Q : Article on maintenance policy for plant

    Write an article on the maintenance policy for overall costs and enhancing plant productivity.

  • Q : Maximum factors Explain the Maximum

    Explain the Maximum factors influences and involvement which will depend on the performance and success of the employees ?