Generates the state dependent cash flows, Financial Accounting

Assignment Help:

Consider an economy with three states which occur with probability (0.2, 0.4, 0.4). Suppose a firm has a project which generates the state dependent cash flows (100, 200, 200) at t=1.

The investment costs are 170 at t=0. The firm owns this money. The market portfolio generates the payoff (200, 250, 300) and has an expected return of 8%. The risk free rate is 3%. Suppose the CAPM holds.

(a) What is the beta of this project?

(b) Explain whether the firm should conduct the project.

 


Related Discussions:- Generates the state dependent cash flows

Recording, explain the terms recording,classifying,summarizing and communic...

explain the terms recording,classifying,summarizing and communicating

Remedies available to beneficiary-breach of trust, Remedies available to be...

Remedies available to beneficiary 1) Injunction - to prevent unauthorised action by trustees; 2) Personal action - a trustee is only liable for his own acts and defaul

Prepare the partners'' present account , Need: a.    Prepare an Income ...

Need: a.    Prepare an Income Statement by with appropriation account for the financial year ended 31.12.2010                            b.    Prepare the partners' present a

Economic order quantity formula, For getting the EOQ formula we shall use t...

For getting the EOQ formula we shall use the subsequent symbols: U = annual usage/demand Q = quantity ordered F = cost per order C = per cent carrying cost P  = pric

Perpetual inventory system, In this type of system store balances are recor...

In this type of system store balances are recorded and computed after all receipt and issue. The main focus of this system is to make obtainable details regarding the quantity and

Calculated market capitalization, What have been the dividends per share? ...

What have been the dividends per share? What is the CAGR of dividends per share from 2008 to 2010? What was the retention ratio for 2008 to 2010? Calculate the DPS growth

What is the pension expense that cooper enterprises, The following informat...

The following information for Cooper Enterprises is given below: December 31, 2013 Assets and obligations Plan assets (at fair value) $200,000 Accumulated benefit obligation 370,00

Show the management report, Q. Show the Management Report? Management's...

Q. Show the Management Report? Management's Report - Management is essential to include in its annual report its assessment of the effectiveness of the company's internal contr

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd