How physical assets valuation and research and development pose risk
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Briefly explain for each how physical asset valuation (PAV) and research and
development (R&D) costs are likely to pose risks? [5 Marks]
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Property, plant, and equipment are examples of physical assets. It is necessary to compute the right depreciation of a physical asset, which entails assigning it a proper asset valuation. If this is done incorrectly, it can have a negative impact on the company's overall balance sheet, as well as the loans used to purchase the asset.
Similarly, it is critical that a firm spend in R&D, but in a sensible manner, because if R&D is not in the proper direction, the company's operations will be disrupted.
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