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Chapter 5: Making capital investment...
Short answer questions

These short answer questions will enable you to assess your understanding of the core material covered in this chapter of Financial Management for Non Specialists.

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1 .       One approach to dealing with inflation in investment appraisal calculations is to exclude inflation from the cash flows and to use a ________ discount rate. [Hint]



2 .       Sensitivity analysis is a ________ form of analysis. [Hint]



3 .       Risk-neutral investors have a ________ utility function. [Hint]



4 .       The dispersion of possible future values associated with a project may be measured using a statistical measure known as ________. [Hint]



5 .       The degree of competition that affects a particular investment opportunity is an example of ________ risk. [Hint]



6 .       Where a normal distribution occurs, ________ per cent of possible outcomes will fall within one standard deviation from the mean or expected value. [Hint]



7 .       The risk-adjusted discount rate is based on the assumption that the level of risk increases with ________. [Hint]



8 .       Probabilities that are based on opinion are often known as ________ probabilities. [Hint]



9 .       The ________ net present value of an investment project is the weighted average of the values of the possible outcomes. [Hint]



10 .       When using sensitivity analysis we normally use the ________ estimate of the value for each of the items of input data. [Hint]



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