Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to twoapartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows:Windy AcresYearly Aftertax CashInflowProbability$50,0000.255,00070,00085,00090,0000.20.20.20.2Hillcrest ApartmentsYearly Aftertax CashInflowProbability$55,0000.460,0000.270,0000.180,0000.3a. Find the expected value of the cash flow for each apartment complex. (Enter the answers in thousands.)Expected cash flowWindy AcresHillcrest Apartments$$b. What is the coefficient of variation for each apartment complex? (Do not round intermediate calculations. Round the final answersto 4 decimal places.)Windy AcresHillcrest ApartmentsCoefficient of variationc. Which apartment complex has more risk?O Hillcrest Apartments

The coefficient of variation (CV) measures the relative variability to its mean. It's calculated by…

Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows: Yearly Aftertax Cash Inflow $50,000 Windy Acres Probability 0.2 0.2 0.2 0.2 0.2 55,000 70,000 85,000 90,000 Hillcrest Apartments Yearly Aftertax Cash Inflow Probability $55,000 60,000 70,000 80,000 0.4 0.2 0.1 0.3 a. Find the expected value of the cash flow for each apartment complex. (Enter the answers in thousands.) Expected cash flow Windy Acres Hillcrest Apartments $ $ b. What is the coefficient of variation for each apartment complex? (Do not round intermediate calculations. Round the final answers to 4 decimal places.) Windy Acres Hillcrest Apartments Coefficient of variation c. Which apartment complex has more risk? O Hillcrest Apartments

Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows: Yearly Aftertax Cash Inflow $50,000 Windy Acres Probability 0.2 0.2 0.2 0.2 0.2 55,000 70,000 85,000 90,000 Hillcrest Apartments Yearly Aftertax Cash Inflow Probability $55,000 60,000 70,000 80,000 0.4 0.2 0.1 0.3 a. Find the expected value of the cash flow for each apartment complex. (Enter the answers in thousands.) Expected cash flow Windy Acres Hillcrest Apartments $ $ b. What is the coefficient of variation for each apartment complex? (Do not round intermediate calculations. Round the final answers to 4 decimal places.) Windy Acres Hillcrest Apartments Coefficient of variation c. Which apartment complex has more risk? O Hillcrest Apartments

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Mrs. John wants to take the next three years off work to travel around the world. She estimates herannual cash needs at $20,000. Mrs. John believes she can invest her savings at 10% until she depletesher funds. Table factor at 10% is 4.883 and at 7% is 4.152To find out how much she should invest now to fund her future cash flow if she invests at 10%. Or whatto invest if only earn 7 %.( Present value of annuity)
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Blossom Googal owns a garage and is contemplating purchasing a tire retreading machine for $32.820. After estimating costs and revenues, Blossom projects a net cash inflow from the retreading machine of $4,700 annually for 11 years. Blossom hopes to earn a return of 8% on such investments. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What is the present value of the retreading operation? (Round answer to 2 decimal places, eg. 25.25) Present value 2$ Should Blossom Googal purchase the retreading machine?
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