QUESTION 1You are considering investment in a project with the following outcomes:Investment Return-10%5%10%12%StateState 1.State 2State 3State 4Probability20%35%15%30%What is the project's standard deviation?4.85%6.34%7.96%9.85%10.34%

In finance standard deviation is a measure of volatility. It is the measure of how much an asset’s…

Answered: You are considering investment in a…

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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Consider the following figure. If firm A were to use the average or composite WACC it would Rate of Return 13.0 (5) 11.0 10.0 90 Project L 70 70 Division L's WACC О Riskov Division H's WACC WACC Project H Composite WACC Firm A Risk Riskov O accept Project L and reject Project H O be making the right decisions on acceptance or rejection of both projects O accept both Project L and Project H O reject both Project L and Project H O accept Project H and reject Project L
A. 6.36 The four alternatives described below are being evaluated. This question has three parts Part 2: If the proposals are mutually exclusive, which one should be selected at a MARR of 14.5% per year? Incremental Rate of Return, %, When Compared with Alternative Overall Initial Alternative Rate of A Investment, $ Return, % -60,000 11.7 -90,000 22.2 43.3 C -140,000 17.9 22.5 10.0 D -190,000 15.8 17.8 10.0 10.0 O B O A O C OD
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Project A has the following estimated cash flows and present values:Year Cash flow $ Discount factor@ 12% Present value $0 Cost (95 000) 1.0 (95 000) 1–5 Contributionper annum 50 000 3.605 180 250 1–5 Fixed costsper annum (25 000) 3.605 (90 125) 5 Residual value 20 000 0.567 11 340 The benefit of using sensitivity analysis in an investment appraisal would be:
You are considering investing in a project with the following possible outcomes: Probability of Investment States Occurrence Returns State 1: Economic boom 18% 20% State 2: Economic growth 42% 16% State 3: Economic decline 30% 3% State 4: Depression 10% -25% Calculate the expected rate of return and standard deviation of returns for this investment, respectively. O 7.35%, 12.99% O2.18%, 1.69% O 8.72%, 12.99% O3.50%, 1.69%
Subject: acounting
Calculate the result of NPV for project A with discount rate = 10%, the best solution is: Year 0 123 + 4 Select one: a. 95.5 b. 127.3 O b. O C. c. -181.8 O d. d. -136.4 A -800 100 200 300 200 B -200 50 70 80 240

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You are considering investment in a project with the following outcomes: Investment Return -10% 5% State State 1. State 2 State 3 State 4 Probability 20% 35% 15% 30% 10% 12% What is the project's standard deviation? 1 95%