Reference no: EM132025573
Suppose a project is dependent on whether there is a good economy and whether a competitor enters the market. If there is no competitor, the project will produce $50 million in a good economy and $15 million in a poor economy. If there is a competitor, the project will produce $30 million in a good economy and $10 million in a poor economy. The probability of a good economy is 60%, versus 40% for a poor economy; and the probability for a competitor to enter the market is 30%, versus 70% for no competitor.
a. Find the expected value of the cash flow from the project.
b. Assume the project cannot begin for three years and has a risk-adjusted discount rate of 18%. Calculate the present value of the project’s expected cash flow.
c. Using the calculation from part b, calculate the expected three-year holdingperiod return, the variance of the three-year holding-period return, and the standard deviation of the three-year holding-period return.
d. Adjust the variance and the standard deviation in part c to annual terms
Part a.
Expected value of the cash flow $ ___ million (round your answer to one decimal place in millions)
Part b.
The present value of the cash flow is $ ___ million (round your answer to four decimal places in millions)
Part c.
Expected three-year holding period return is ___ % (round your answer to two decimal places)
Expected three-year variance in returns is ___ (round your answer to two decimal places)
Expected three-year standard deviation of returns is ___ % (round your answer to two decimal places)
Part d.
Annual Variance: ___ (round your answer to two decimal places)
Annual Standard Deviation: ___ % (round your answer to two decimal places)
Explain unhealthy personality traits
: Describe how this research data might be used to explain unhealthy personality traits. Describe how the emerging field of epigenetics is impacting.
|
What things surprised you about the study
: The Centers for Disease Control and Prevention (CDC n.d.) completed a study on the impact of Adverse Childhood Experiences (ACEs) on the long-term health.
|
What was cey corporation income before taxes
: In recent year Cey Corporation had net income of $750,000, interest expense of $150,000, What was Cey Corporation's income before taxes for the year
|
What is total amount of federal and state unemployment tax
: Roxy Co., which has a taxable payroll of $800,000, is subject to FUTA tax of 6.2%. What is the total amount of federal and state unemployment tax for Roxy Co.
|
Calculate the present value of project expected cash flow
: Find the expected value of the cash flow from the project. Calculate the present value of the project’s expected cash flow.
|
What implications do you think for your life
: Elaborate discussion forum by answering the following question(s) (400 wordsor more/ Times New Roman, 10/ *double spaced not necessary for non-essay questions*)
|
Generate a binomial tree to value the development option
: Generate a binomial tree (each stage of the tree being one year) to value the development option and make a decision.
|
What would happen to the stock required rate of return
: If the market risk premium increased to 10%, what would happen to the stock's required rate of return?
|
What is the initial investment outlay for spectrometer
: What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow?
|