How would you explain scale and its impact

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Question: 1. The chapter proves that scale does not affect the outcome of the NPV. Can you think of some real-life examples where the choice among different investments would be affected by their scale? If you were discussing investments with the non-business major, how would you explain scale and its impact?

2. Some benefits and costs cannot be quantified. What kinds of benefits and costs elude quantification, and how can these be factored into an investment decision?

3. How can one estimate cannibalization? Financial managers work closely with marketing and other departments in the development of project cash flows. Which department might be best equipped to answer this question?

4. React to the following statement, based on research by a reputable source: Debt in the capital structure makes managers more efficient because they are required to pay a fixed charge (interest). Managers of firms that have considerable excess funds tend to choose riskier projects because they have a "cushion" for their mistakes.

Reference no: EM132754929

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