Category Archives: ANALYSIS OF RISK AND UNCERTAINTY

DESCRIPTION AND MEASUREMENT RISK

DESCRIPTION AND MEASUREMENT RISK Definition of Risk As already observed, risk analysis should be incorporated in the capital budgeting exercise. In general, other things being equal, a firm would be well advised to accept a project which is less risky and reject those that involve more risk. This recommendation is consistent with the assumption that the management is averse to risk. The capital budgeting decisio

ANALYSIS OF RISK AND UNCERTAINTY

ANALYSIS OF RISK AND UNCERTAINTY INTRODUCTION This Chapter discusses the risk and uncertainty associated with capital budgeting. The importance of the risk dimension in capital budgeting can hardly be over-stressed. In fact, profitability and risk are closely related. It is very likely that a project which is potentially very profitable may also increase the perceived risk of the firm, This trade off between ri