Describe the coefficient of variation

Assignment Help Business Management

Reference no: EM13791773

Problem 1

A generous university benefactor has agreed to donate a large amount of money for student scholarships. The money can be provided in one lump sum of $12 million in Year 0 (the current year), or in parts, in which $7 million can be provided at the end of Year 1, and another $7 million can be provided at the end of Year 2.

Describe your answer for each item below in complete sentences, whenever it is necessary. Show all of your calculations and processes for the following points:

Assuming the opportunity interest rate is 8%, what is the present value of the second alternative mentioned above? Which of the two alternatives should be chosen and why?
How would your decision change if the opportunity interest rate is 12%?
Provide a description of a scenario where this kind of decision between two types of payment streams applies in the "real-world" business setting.

Problem 2

The San Diego LLC is considering a three-year project, Project A, involving an initial investment of $80 million and the following cash inflows and probabilities:

Describe your answer for each question in complete sentences, whenever it is necessary. Show all of your calculations and processes for the following points:

Describe and calculate Project A's expected net present value (ENPV) and standard deviation (SD), assuming the discount rate (or risk-free interest rate) to be 8%. What is the decision rule in terms of ENPV? What will be San Diego LLC's decision regarding this project? Describe your answer.
The company is also considering another three-year project, Project B, which has an ENPV of $32 million and standard deviation of $10.5 million. Project A and B are mutually exclusive. Which of the two projects would you prefer if you do not consider the risk factor? Explain.
Describe the coefficient of variation (CV) and the standard deviation (SD) in connection with risk attitudes and decision making. If you now also consider your risk-aversion attitude, as the CEO of the San Diego LLC will you make a different decision between Project A and Project B? Why or why not?

Reference no: EM13791773

Questions Cloud

Implementation of business analytics : With the implementation of business analytics, an organization will also need to implement a good information systems plan in order to collect, manage, and organize all of the data.

Explore a companys annual report : Provide common size analysis of your company's income statement and balance sheet for the 2 most recent years (must be done using Excel with formulas).

Write a paper about argument by analogy final : Write a paper about Argument by Analogy Final.

What is involved in analyzing potential job hazards : What is involved in analyzing potential job hazards and developing an accident prevention plan that will prevent and reduce the cost of accidents

Describe the coefficient of variation : Provide a description of a scenario where this kind of decision between two types of payment streams applies in the "real-world" business setting.

Importance of listening and responding in effective nego : The Importance of Listening and Responding in Effective Negotiation

Why is msft raising money? : Why YTM differs from coupon rate? What should we compare YTM with?

International tax reform for dummies-forbes : In no less than 200 words, describe three of the described systems that are either currently used or proposed to ameliorate the burden of international double taxation. Indicate which of these is most advantageous to taxpayers and why this is so. ..

Clearly explained actions that address the problem : An investment advisor and your clients, Marilyn and David, require your services. Marilyn and David are both 65 and are about to retire. They have no assets other than $1,600,000 in cash savings, and they have no debts. They wish to maintain their cu..

User Account

All Pages