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

Non-quantifiable factors to accept the proposal, Any non-quantifiable facto...

Any non-quantifiable factors you feel might influence the decision to accept the proposal. Net present value methods are merely assessments of factors that we can quantify. The

Find annual acquiring firm, Find the annual reports of the acquiring firm a...

Find the annual reports of the acquiring firm and answer the following questions for the five years before merger took place I)   What information is provided about merger a

What is basic defination of fca, Q. What is basic defination of FCA? Ye...

Q. What is basic defination of FCA? Yes. FCA is a method of accounting for all financial costs of funds used or committed for municipal solid waste (MSW) services. FCA suggests

Calculate the profits for investments, Both a call and a put currently are ...

Both a call and a put currently are traded on stock XYZ; both have strike prices of $50 and expirations of 6 months.  What will be the profit to an investor who buys the call for $

Registration of deeds of arrangement and assent of creditors, Registration ...

Registration of a D of A and assent of creditors A D of A will be void unless it is registered with the Registrar within 7 clear days after first execution and is properly stam

Equity, How do you report a note in exchange for treasury stock

How do you report a note in exchange for treasury stock

Determine gross pay, Conny Duffy started working for Dexter Company on Thur...

Conny Duffy started working for Dexter Company on Thursday and 9 hours on Frida. Her annual salary is $80,000 and she is exempt white-collar employee. Determine her gross pay for h

Flexible budget and static budget, Brabham Enterprises manufactures tires f...

Brabham Enterprises manufactures tires for the Formula One motor racing circuit. For August 2011, Brabham budgeted to manufacture and sell 3,000 tires at a variable cost of $74

Define return on capital employed, Q. Define Return on capital employed? ...

Q. Define Return on capital employed? Return on capital employed (ROCE) is as well called accounting rate of return. Distinctly IRR ROCE uses average annual accounting profit b

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