Standard deviation based on risk

Assignment Help Financial Management

Reference no: EM13925476

Project Alpha has an NPV of $10 million and a standard deviation based on risk analysis of $3 million. Project Beta has an NPV of $8 million and a standard deviation based on risk of $2 million. Which project should be selected and why?

a. Select Alpha because it has the higher NPV

b. Select Beta because it has the lower risk as represented by standard deviation

c. Select either project because both have positive NPVs and relatively low risk compared to their NPVs

d. Don't select either project because there is too much risk associated with both projects.

e. There is no clear decision rule, the choice depends on management's degree of risk aversion

Reference no: EM13925476

Questions Cloud

Knowledge apply to a career in criminal justice : How will this new terminology and knowledge apply to a career in criminal justice?

Identify primary and secondary threats addressed in strategy : Identify the primary and secondary threats that are addressed by the NSWBCN Strategy, explaining why they were addressed by a comprehensive, fully-coordinated national policy. Provide the reader with the analytical basis for this document and the ..

What is the probability of cash flow two years : A cash flow is expected to be $500.00 (50% probability) or $1,000.00 (50% probability) next year. Assuming the cash flow next year is $500.00, the cash flow the following year is $400.00 (60% probability) or $600.00 (40% probability). What is the pro..

Shredding service has just completed : Houston's Shredding Service has just completed a minor repair on a shredding machine. The repair cost was $1,010, and the book value prior to the repair was $4,750.

Standard deviation based on risk : Project Alpha has an NPV of $10 million and a standard deviation based on risk analysis of $3 million. Project Beta has an NPV of $8 million and a standard deviation based on risk of $2 million. Which project should be selected and why?

Strengths and weaknesses of your envisioned design : Identify the strengths and weaknesses of your envisioned design and methods.

Cultural values and lifestyle preferences : Today's managers have found that employees do not set aside their cultural values and lifestyle preferences when they come to work. The challenge is to make organizations more accommodating to diverse groups of people by addressing different life..

Economic life to an estimated salvage value : The management of Jasper Equipment Company is planning to purchase a new milling machine that will cost $160,000 installed. The old milling machine has been fully depreciated but can be sold for $15,000. The new machine will be depreciated on a strai..

Wright company produces products : Wright Company produces products I, J, and K from a single raw material input. Budgeted data for the next month

User Account

All Pages