Why the diversification reduces the portfolio risk

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1. Given the following forecasted data, determine the number of planes that the company must produce in order to break even, on both accounting basis and NPV basis: the 8-year project initial investment is $1,000 million, each plane sold for $25 million, the variable cost is $10 million each plane, the fixed cost is $250 million, the depreciation uses straight-line method, tax rate is 40% and the company's cost of capital is 12%. What is the accouting break-even and economic break-even for the project?

2. Can you explain how and why the diversification reduces the portfolio risk?

Reference no: EM133171109

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