Calculate the coefficient of variation for each project

Assignment Help Financial Management
Reference no: EM131300207

a) Which project is least? risky, judging on the basis of range?

b) Which project has the lowest standard deviation ? Explain why standard deviation may not be an entirely appropriate measure of risk for purposes of this comparison.

c) Calculate the coefficient of variation for each project. Which project do you think? Greengage's owners should? choose?

Project                        Expected return               range               standard deviation

A                               11.9%                                 6.3%                       3.1%

B                                  13.2%                             5.2%                           3.9%

C                                   13.4%                              4.5%                          3.5%

D                                 12.9%                                6.2%                         2.6%

Reference no: EM131300207

Questions Cloud

Calculate the semi-annual coupon payment : Lintron Inc issued corporate bonds to finance the purchase of a new plasma die cutting machine. The bonds are currently selling for $1035.50 and have 8 years remaining until maturity. The market interest rate is 5.4% annually. Calculate the semi-annu..
Project create in present value terms : TeleStark is considering building a new manufacturing plant. This plant will cost $9 million to build. The new plant will produce cash inflows of $2.05 million per year for the next 7 years. TeleStark already owns the land on which it intends to buil..
What is the annual dollar amount of interest : Assume that three years ago you purchased a corporate bond that pays 8.5 percent. The purchase price was $1070. What is the annual dollar amount of interest that you receive from your bond investment?
Make to the university to fund the endowment : On completion of her introductory finance? course, Marla Lee was so pleased with the amount of useful and interesting knowledge she gained that she convinced her? parents, who were wealthy alums of the university she was? attending, to create an endo..
Calculate the coefficient of variation for each project : Which project is least? risky, judging on the basis of range? Calculate the coefficient of variation for each project. Which project do you think? Greengage's owners should? choose?
Draw the cash flow diagram : A software engineer planning for his retirement will deposit 12% of his salary each year into a high technology stock fund. If his salary this year is S 120,000 and he expects his salary to increase 5% each year, how much will he have in the fund aft..
What is required rate of return on equity for each company : North Pole Fishing Equipment and South Pole Fishing Equipment would have identical equity betas of 1.25 if both were all equity financed.  What is the equity beta of each of the two companies? What is the required rate of return on equity for each co..
What is the adjusted present value of the project : Zulu Car Rental Corporation is trying to determine whether to add 25 cars to its fleet. The company fully depreciates all its rental cars over 5 years using the straight line method. The new cars are expected to generate $140,000 per year in earnings..
What is the current value of the annuity : A 4-year annuity of eight $8,200 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now If the discount rate is 14 percent compounded monthly, what is the value of this annuity five years from now? what is t..

Reviews

Write a Review

Financial Management Questions & Answers

  How much will you pay in capital gains taxes

If you buy a home for $100,000 Mortgage, Insurance & Taxes costs you $1,000 a month Your Mortgage interest rate is 4% and you had a down payment of $3,000 It costs you roughly $3,000 a year for maintenance and upkeep. You sell your home after 5 years..

  Collection of municipal bonds and corporate bonds

“Assume you have a collection of municipal bonds and corporate bonds of similar maturities and default risk (i.e. both sets of bonds carry a rating of “AA+” from Standard and Poor’s). Accordingly, a yield curve formed from municipal bonds will be hig..

  What is market value of assets of firm

The book value of equity of a firm is $82 million and the market value of equity is $96 million. The face value of debt of the firm is $40 million and the market value of debt is $16 million. What is the market value of assets of the firm?

  Determining the firms appropriate debt-to-equity ratio

What are the 4 main criteria that a firm should consider when determining the firm’s appropriate debt-to-equity ratio? Is the ratio likely to change over time? How?

  Projects expected returns are normally distributed

Assume that a project's expected returns are normally distributed. The returns have a mean of 16% and a standard deviation of 2%. What is the probability of failure if the project is expected to provide a return of 14%?

  Long-term government bonds-small company stocks respectively

The total annual returns on large company common stocks averaged 12.3% from 1926 to 2011, small company stocks averaged 17.4%, long-term government bonds averaged 5.8%, while Treasury Bills averaged 3.8%. What was the average risk premium earned by l..

  A project requires an initial investment

A project requires an initial investment of $200,000 and expects to produce a cash flow before taxes of 120,000 per year for two years (i.e., cash flows will occur at t = 1 and t = 2). The corporate tax rate is 30%. The assets will depreciate using t..

  Find the historical volatility

Consider Apple stock. Look at the current price of the stock and options expiring in Ma. First find the historical volatility. To do this calculates the change in LN (S) daily for 60 days. Then find the variance. Excel has the function VAR () to do t..

  Mortgage loan-what is effective annual rate

You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 35-year mortgage loan for 85 percent of the $2,500,000 purchase price. The monthly payment on this loan will be $16,600. what is effective annual rate?

  Is this price-fixing fair-ethical and socially responsible

Assume you are a businessperson with an opportunity to make more money by meeting with competitors and fixing prices, conduct which is illegal. The authorities will not discover that the prices have been fixed. Is this price-fixing fair? Ethical? Soc..

  Discuss fully who is responsible for repairing the roof

Sarah has rented a house from Frank. The house is only two years old, but the roof leaks every time it rains. The water that has accumulated in the attic has caused plaster to fall off ceilings in the upstairs bedrooms, and one ceiling has started to..

  What is the net borrowing cost to illinois for the bab

Consider a BAB (Build America Bond) issued by the State of Illinois. This bond was issued on July 1, 2010. It was a 25-year bond at issue, had an A credit rating from S&P, and was issued at a yield (interest rate) of 7.1%. What is the net borrowing c..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd