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

Trustees right to be indemnified-trusts laws and accounts, Trustees right t...

Trustees right to be indemnified Trustees have, however, a right to be indemnified: 1. Out of trust property, for all expenses properly incurred in the execution of the tru

Expense during 2013 on patent, In January, 2008, Sanford Corporation purcha...

In January, 2008, Sanford Corporation purchased a patent for a new product for $1,200,000. The patent was valid for fifteen years but it was estimated to have a useful life of ten

Inventory., Tubby is a retailer that buys and sells handmade robotic toys. ...

Tubby is a retailer that buys and sells handmade robotic toys. He buys a basic prototype and then programs it to do all sorts of unique tricks. The following information was provi

Evaluate price earnings ratio, Q. Evaluate Price Earnings Ratio? The P/...

Q. Evaluate Price Earnings Ratio? The P/E ratio is in general regarded as an important ratio for equity investors. The P/E for a company may be utilizing as a basis for compari

Calculate the sales needed to earn a profit of 20% on sales, Question: ...

Question: The following data are obtained from the record of a factory:                                                        £                   £ Sales 4,000 units @ £2

Practice Test, I need help with a practice test so I can study well for my ...

I need help with a practice test so I can study well for my midterm soon this week.

How much are joe''s shares worth after the stock split?, Joe Shareholder ow...

Joe Shareholder owns 100 shares of Peach Company stock which is currently selling for $100 per share. Peach declares a 2-1 stock split. How much are Joe's shares worth after the st

Illustration of change in profit sharing ratio, Illustration of change in p...

Illustration of change in profit sharing ratio A, B and C have been trading as equal partners having capital contributions of £400,000, £300,000 and £200,000 respectively. They

Real estate investment trust, Real Estate Investment Trust (REIT) - Investo...

Real Estate Investment Trust (REIT) - Investor-owned TRUST that invests in real estate and, in place of paying income tax on its income, reports to each of its owners her or his pr

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