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Your team is evaluating two mutually exclusive projects. The initial cost of each investment is $50,000. The probability of the cash flows is shown below.
If the project will have a 5 year life and the appropriate cost of capital is 9% calculate the following:
Probability
CF(A)
CF(B)
10%
(34,000)
(13,500)
25%
(8,500)
2,125
30%
17,000
19,000
42,500
31,875
68,000
46,750
Expected value
NPV
Standard deviation
IRR
MIRR
Use the information below for the next problem
Depreciation
34,000
EBIT
179,000
Investment in Operating Assets
69,000
Tax Rate
34%
Find the free cash flow
Calculate the free cash flow
Use the following information for the next problem
The Security Market Line
Security X
Market
Beta
0.76
1
Expected Return
?
12%
If the risk free rate is
2.80%
Find the expected return on security X
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