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Determined the expected present value

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Question - Environ Ltd has gathered the following information regarding the probable cost of two alternative projects designed to recycle effluent which is environmental sensitive. One of the project must be accepted in accordance with legislation relating to environmental pollution. The possible net cash flows have been discounted at 16% but are heavily dependent upon factors that cannot be predicted with certainty. However, the probabilities of occurrence have been established.

Required -

a) Determined the expected present value (or cost) of each of the two projects.

b) Using the mean-variance analysis, and the assumption of continuous probabilities, recommend which project should be accepted.

Reference no: EM133173241

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