Answered: Return on Investment Probability…

Return on Investment Probability Project A Project B 0.10 -20% -35% 0.20 -10% 0.25 10% 15% 0.30 15% 25% 0.10 20% 40% 0.05 40% 50%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

You are considering investing in one of two projects, which have the following returns and probabilities of occurrence:

(a) Compute the mean return for each project.
(b) Compute the variance of return for each project.
(c) Which project would you prefer, and why?

Return on Investment
Probability
Project A
Project B
0.10
-20%
-35%
0.20
-10%
0.25
10%
15%
0.30
15%
25%
0.10
20%
40%
0.05
40%
50%

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