2. Based on an approximation with the beta distribution, which has been used in project management for a long time, compute the mean for each parameter and the calculate the present worth using the mean values. MARR = 10%. Optimistic $500 Most likely $1,000 $200 Pessimistic $1,200 $150 $0 Initial cost Annual benefit $220 Salvage value Useful life, in years $50 $40 10 8

Q: 28. Madson's is analyzing two projects for the future. Assume that only one project can be selected.…

A: Payback period is the time required to recover the investment.

Q: You are making an intial investment of $111,061 and require a rate of retum of 12 percent. You…

A: Net present value = Present value of cashflows - Initial investment

Q: Three mutually exclusive projects are being considered. First cost   2000    3000    4000 uniform…

A: AW, project A = 2,000 x A/P (8%, 5) +200+1,000 x A, 5)= -2000 +0.2505+200+1,000×0.1705=…

Q: Based upon the information below calculate the Expected Return of the Asset (E)= ∑ Pr * R Worst…

A: Expected return on asset = P1×R1+P2×R2+.....+Pn×Rn Where, Pn  is nth probability  Rn is return for…

Q: pm.5   Find the expected rate of return using the three estimates provided in the table below for…

A: Given data:Pessimistic First Cost = $1,052Most Likely First Cost = $1,000Optimistic First Cost =…

Q: Which of the following values comes closest to the payback of a project that requires an initial…

A: here below is the table to find no of years                       year                 cashflows…

Q: Compute the net present value (NPV) of this investment.

A: Meaning of Net present value It is the difference between present value of cash inflows and present…

Q: What is the payback period for a project with following cashflow: year 0= -100,000; year 1= 30,000;…

A: Year Cash flow 0 -100000 1 30000 2 30000 3 30000 4 20000 5 10000 6 0

Q: 10. You are also considering another project with a physical life of 3 years; that is, themachinery…

A: Operate for full 3 years operation the NPV is  $96,952.44 Terminate the project at the end of year 2…

Q: Consider the financial data for a project given in the table below. (a) What is for this project?…

A: Making decisions about capital budgeting entails assessing and choosing capital expenditures or…

Q: You are considering a capital project that requires an initial investment of $ 40,000 , has…

A: Present value of annual cash flows = Annual Cash Flow × Present value annuity factor of year 4 at…

Q: XYZ is evaluating a project that would require an initial investment of $74,900.00 today. The…

A: Internal  Rate of Return is also known as IRR. It is a capital budgeting techniques which help in…

Q: Swifty Company is considering a long-term investment project called ZIP. ZIP will require an…

A: The question is based on the concept of Financial Management. NPV is the difference between the…

Q: Problem 2. The first cost (FC), life (n), and annual benefits (A) for a prospective project are…

A: ParticularsPessimisticMost likelyOptimisticFirst cost$150,000.00$100,000.00$80,000.00Annual…

Q: A new project will cost $80,000 initially and will last for 7 years, at which time its salvage value…

A: The question is based on the concept of sensitivity analysis of capital budgeting. The analysis…

Q: 3.4 Amber was evaluating the feasibility of a project that has an initial investment of $205,000 and…

A: IRR is the rate an investor earns on his investment during his investment horizon. It is an…

Q: Project X has an initial investment cost of $20.0 million. After 10 years it will have a salvage…

A: Internal rate of return is the return at which present value of cash flow is equal to initial…

Q: A new machine is to be purchased for $200,000. The company believes it will generate $75,000…

A: GIVEN   A new machine is to be purchased for $200,000. The company believes it will generate $75,000…

Q: Consider a new business line that your company will start:     Costs to launch the project:…

A: Net present Value: This is a very important concept in capital budgeting. NPV can be computed by…

Q: . Roman Knoze is considering the following investment. The project will cost $20,000 initially, and…

A: Here, Year Cash flows 0  $  -20,000 1  $     5,000 2  $   10,000 3  $   15,000 Discount…

Q: Third Question: An investment of 4000$ and estimated salvage value of 3000$, and the following…

A: To evaluate the investment using the External Rate of Return (ERR) method, we need to follow these…

Q: termine the associated risk measure in this equipment investment in terms of standard deviation.…

A: Standard deviation is measure of the risk of the projects and can be measured by net present value…

Q: 10. Choose the best alternative among the three alternatives given in the table below. Use of annual…

A: Equivalent Annual Cost = Annual worth Benefit – Annual Worth of cost. Annual worth is calculated…

Q: You are evaluating a project that will cost $507,000, but is expected to produce cash flows of…

A: a). The payback period of the project is calculated using following equation Payback period =…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.