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Consider a person with the following utility function over wealth: u(w) = ew, where e is the exponential function (approximately equal to 2.7183) and w = wealth in hundreds of thousands of dollars. Suppose that this person has a 40% chance of wealth of $100,000 and a 60% chance of wealth of $2,000,000 as summarized by P(0.40, $100,000, $2,000,000).
a. What is the expected value of wealth?
b. Is this person risk averse, risk neutral, or a risk seeker?
c. What is this person’s certainty equivalent for the prospect?
Given Years 0 1 2 3 4 5 Intial investment ($15,000,000) Net operating cash flows $2,000,000 $4,000,000 $5,000,000 $8,000,000 $16,000,000 1. Determine the payback for the new dialysis unit 2. Determine the NPV using a cost capital for 15% 3. At a 15% ..
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Calculate (the absolute value of) the difference between the clean theoretical and dirty theoretical value.
GRADED DISCUSSION WEEK 2 The Hamptons Home of a Famed Socialite Hits the Market “Before there was Paris Hilton, there was Consuelo Vanderbilt Balsan – a Gilded Age heiress and socialite, re-nowned for her beauty and wealth. Calculate the annual compo..
Your division is considering 2 investment projects, each of require up-front expenditure of $15 million. a. what are the 3 projects NVP assuming the cost of capital is 5%, 10%, 15% b. What are the 2 projects IRR at these same costs of capital?
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