Risk and probability Micro-Pub, Inc., is considering the purchase of one of two digital cameras, R and S, each ofwhich requires an initial investment of $4,000. Management has constructed the following table of estimates of rates ofreturn and probabilities for pessimistic, most likely, and optimistic results:a. Determine the range for the rate of return for each of the two cameras.b. Determine the value of the expected return for each camera.c. Which camera purchase is riskier? Why?a. The range for the rate of return for camera R is%. (Round to the nearest whole number.)The range for the rate of return for camera S is ☐ %. (Round to the nearest whole number.)b. The value of the expected return for camera R is%. (Round to two decimal places.)The value of the expected return for camera S is %. (Round to two decimal places.)c. Which camera purchase is riskier? Why? (Select from the drop-down menus.)The purchase ofis riskier because it has arange for the rate of return. Camera RAmount ProbabilityAmountCamera SProbabilityInitial investment$4,0001.00$4,0001.00Annual rate of returnPessimistic19%0.2824%0.16Most likely27%0.5225%0.52Optimistic35%0.2030%0.32

a. Determine the range for the rate of return for each of the two cameras. Range = Optimistic Rate -…

Answered: Risk and probability Micro-Pub, Inc.,…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 12P

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