c. a cafe/restaurant d. a fashion accessory company.•12.2 Investment decisions are made by managers...

Question

c. a cafe/restaurant d. a fashion accessory company.
•
12.2 Investment decisions are made by managers in all types of business entities. Describe the common features of investments that must be taken into consideration for any investment decision making activity. 12.3 What is the difference between risk and return in finance?
12.4 What factors must be taken into consideration in determining the discount rate used in investment decisions? 12.5 Define the accounting rate of return. What are the two components of the investment that must be known in order to perform this calculation? 12.6 What factors are taken into consideration in determining an appropriate ARR? Discuss the factors that would lead to an investment being selected with a shorter payback period. Define the term 'discount rate' and explain how entities set their rates. How does inflation impact on the setting of discount rates? Compare the calculation of the ARR with the IRR. What advantages does the IRR have compared with the ARR? 12.11 Outline the differences between inflation and deflation. Discuss investment strategies for each.
XXXXXXXXXX
Self-evaluation activities t will cost 0D Developmen "n n00, $50000,

005_mfjjjk-hkev4gm3.jpg 005_3fjjjk-4mtxpl2l.jpg 005_xlnjjk-m0japvgp.jpg

Robert · Accepted Answer

SOLUTION 12.2: 
Investments are generally made by every type of the enterprise and they are made with the 
intention of earning profits. But there are certain features which need to be evaluated before 
making any investment decision. It shall be determined whether the investment provides tax 
advantages; basically tax implications of investments shall be analyzed. The normal taxation as 
well as capital gain tax and the tax savings due to the investment shall be evaluated. It shall be 
determined whether the purchase is easy and cheap. The details about the redemption and pay 
back shall also be evaluated. The risk involved shall be analyzed so that the overall risk of the 
portfolio is reduced. The predictable stream of investment income shall be determined and it 
shall be enquired whether the investment provide the reinvestment opportunity as well.
SOLUTION 12.3: 
Risk is the probability of loss resulting from an undesirable economic development with regard 
to the portfolio of an investor or operating activities. Financial risk is the chances of loss 
resulting from adverse price changes in financial markets or due to the defaults of business 
partner.  
Return can be called as the profit, shown in percent or dollar terms, which an investor earns in a 
business transaction. A risk-reward trade-off is a financial term stating the profits that can be 
made by an investor at given risk levels. The lower risk and high return investment is desired by 
the investors. 
Relationship between risk and return is a “direct” or “positive” relationship which means when 
risk rises,

c. a cafe/restaurant d. a fashion accessory company. • 12.2 Investment decisions are made by managers in all types of business entities. Describe the common features of investments that must be taken...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment