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FIN200 Risk and Uncertainty Assignment | Corporate Financial Management

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FIN200 Assignment - Corporate Financial Management (FIN200)

   

Added on  2019-11-12

FIN200 Risk and Uncertainty Assignment | Corporate Financial Management

   

FIN200 Assignment - Corporate Financial Management (FIN200)

   Added on 2019-11-12

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Corporate Financial Management1 | Page
FIN200 Risk and Uncertainty Assignment | Corporate Financial Management_1
Table of ContentsSensitivity analysis......................................................................................................................................3Scenario Analysis........................................................................................................................................4Break-Even Analysis...................................................................................................................................5Simulation techniques.................................................................................................................................6Conclusion...................................................................................................................................................82 | Page
FIN200 Risk and Uncertainty Assignment | Corporate Financial Management_2
Under the different tools and techniques of capital budgeting, the management of the companyconsiders the various capital outlays that it has under its proposals. The main exercise that isinvolved in the overall process of capital budgeting is to correlate the various benefits that are tobe achieved over the period of time and consistency of performance that helps in maximizing theoverall objective of the business. Management has to analyze risk as a key function of financialmanagement. As it is generally seen that the long term investment decisions tend to becomplicated in nature, there exist a high vulnerability of external risk and uncertainty. As theacquisition of business Assets and resources are the activities which are continuous and nature,therefore management should utilise their expertise in order to evaluate correct and fair valuationof business enterprise. In the current assignment, the analyst discussed over different conceptsthat are in relation to utilisation of capital budgeting techniques and a business enterprise. Someof them are discussed as follows - Sensitivity analysis – Approach of investing in assets related to business are the major reasonsfor growth and development of the business enterprise. The company with the objective ofachieving long term goals with timely approach must take efficient decision on the part of capitalinvestments. Growth and development of the business organization are not only achievedthrough the purchase of new machinery and equipment but also expanding business operationsthrough developing new products and services. Before investing and placing money into aproject it is greatly required to understand and evaluate the associated risk, business strengthsand weaknesses (Жамойда & Мацюк, 2011). Though risk cannot be completely avoided, but itshould be minimised to acceptable business appetite. For this purpose management of thebusiness, the organization must conduct sensitivity analysis as a part of capital budgetingtechnique in order to evaluate the possible risk and effectiveness of investment opportunities(Bennouna, et. al., 2010). Sensitivity analysis as a part of capital budgeting techniques supports the business managers toevaluate the uncertain situations. As in a General scenario business activities are based onforecasts which are determined on the basis of certain assumptions and estimates. The techniqueof sensitivity analysis focuses on the part wherein the impact on the financial part of thecompany is visualised while making changes in assumptions and business estimates. The tool of3 | Page
FIN200 Risk and Uncertainty Assignment | Corporate Financial Management_3

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