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BRILLIANT’S Analysis of Risk and Uncertainty in Investment Decisions 487

Year 3: (in `)

CF Probability (CF–EVCF) 2 Prob.×(CF–EVCF) 2
800 0.2 (800 – 1,160) 2 25,920
1,000 0.5 (1,000 – 1,160) 2 12,800
1,500 0.2 (1,500 – 1,160) 2 23,120
2,000 0.1 (2,000 – 1,160) 2 70,560
1,32,400

Standard Deviation ( ) = 1,32,400  363.87 
3
REVIEW QUESTIONS
Q.1. What are the techniques of risk analysis?
[añH$ EZm{b{gg H$s VH$ZrH|$ ³¶m h¢? [See Q.53]
Q.2. How are risk analyzed in a sensitivity analysis technique?
EH$ g|{g{Q>{dQ>r EZm{b{gg VH$ZrH$ ‘| [añH$ H$m {díbofU H¡$go {H$¶m OmVm h¡? [See Q. 53]
Q.3. What are the types of risk involved in the evaluation of capital budgeting decision?
H¡${nQ>b ~OqQ>J {ZU©¶ Ho$ ‘yë¶m§H$Z ‘| gpå‘{bV [añH$ Ho$ àH$ma ³¶m h¢? [See Q. 52]

Q.4. What do you mean by simulation analysis? Discuss the procedure for simulation analy-
sis under Monte Carlo method.
{gå¶yboeZ EZm{b{gg go AmnH$m ³¶m Ame¶ h¡? ‘m|Q>o H$mbm} ‘oWS> Ho$ A§VJ©V {gå¶yboeZ EZm{b{gg Ho$ {bE
à{H«$¶m H$s ì¶m»¶m H$s{OE& [See Q.54]

Q.5. Write a short note on Decision tree approach.
{S>[gOZ Q´>r EàmoM na g§{jßV {Q>ßnUr {b{IE& [See Q.55]


PRACTICAL QUESTIONS

RISK ADJUSTED DISCOUNT RATE METHOD

5.2.1 From the following data, state which project is better for investment?
Year Project A (`) Project B (`)

0 (15,000) (20,000)
1 7,000 8,000
2 6,000 7,000
3 2,000 6,000