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Your company asks you to analyze two mutually exclusive projects for the coming year. Project A will have an initial outlay of $7,200. Project B will cost $6,800. Both projects will last for three years.On the basis of the information regarding the risk involved in the two projects, you come up with the following probability distributions for the projects:Project AProject BProbabilityNet Cash Flows ($)ProbabilityNet Cash Flows ($)0.28,1000.25000.59,1000.58,1000.310,5000.316,500To evaluate the two projects, you decide to use the company's weighted average cost of capital (WACC) for the less risky project (12 percent) and the WACC plus two points (14 percent) for the more risky project.•What is the expected value for each project? What does this value represent?•What is the coefficient of variation for each project? What information does this measure provide to you and to the company?•Which project has the most risk? Why?•What is the risk-adjusted NPV for each project? What do these measures tell you and the company?•Which project would you recommend to management, and how would you justify your selection?•If these two projects were not mutually exclusive, would you select both? Why or why not? Create your report in a 2- to 3-page Microsoft Word document.Calculated the expected value for each project, explained what this value represents, calculated the coefficient of variation for each project, and described what information this measure provides to you and to the company. Analyzed and justified which project has the most risk, calculated the risk-adjusted NPV for each project, and explained what these measures tell you and the company. Analyzed and justified which project you would recommend to management, and if these two projects were not mutually exclusive whether you would select both.
According to Summers what is the most important event over the past 25 years in the global economy Does he see the success of China and the other emerging economies as a threat to the US Why or why not
the construction time for a bridge depends on the weather. the project is expected to take 250days if the weather is dry and hot. if the wather is damp and cool it will take 350days. otherwise, it is expected to take 300 days.
To simplify the computations, suppose the cost of production is zero for both products. You have estimated that there are three types of customers, I, II, and III, who buy the products of the firm. There are 2,000 customers of each type, and they ..
Consider the following short-run production function ( where L =variable input, Q=output): Q=10L - 0.5 L2 Suppose that output can be sold for $10 per unit. Also assume that the firm can obtain as much of the variable input (L) as it needs at $20 p..
Labor Supply a. Ann's utility can be represented by the function: U (C,L) = ln (C-10) + 3/5 ln(L). She has 16 hours/day to divide into work (H) and leisure (L). She has no unearned income. Derive the formula for her Marginal Rate of Substitution a..
Suppose a natural monopolist has fixed costs of $24 and a constant marginal cost of $2. The demand for the product is as follows: Price (per unit) $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 Quantity demanded (units per day) 0 2 4 6 8 10 12 14 16 18
Suppose that a monopoly firm finds that its MR is $50 for the first unit sold each day, $49 for the second unit sold each day, $48 for the third unit sold each day, and so on. Further suppose that the first worker hired produces 5 units per day
Suppose the natural rate of unemployment in 2005 is 5% and the actual rate of unemployment is 9%. Use Okun's law to determine the size of the GDP gap in percentage-point terms. If the potential GDP is $500B in that year
A consumer has income of $3,000.Wine cost $3 per glass, and cheese cost $6 per pound. Draw the consumers budget constraint. Draw the consumer's budget constraint. What is the slope fo this budget constraint
For each of the following scenarios, determine whether the decision maker is risk neutral, risk averse, or risk loving. a. A manager prefers a 10 percent chance of receiving $1,000 and a 90 percent chance of receiving $100 to receiving $190 for sur..
The New York Taxi Cab Company has just purchased a new fleet of models for the year 2000. Each brand-new cab cost $20,000. From past experience, the company estimates after-tax cash returns for each cab as: An = $65,800 - 30,250(1 + 0.15)^(n-1)
For the declining-balance method, Wang Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 24,000. Actual hours of use in the first 3 years were: 2009, 400; 2010, 4,500; and 2011, 5,000.
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