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

Bankruptcy accounts for individuals and partnerships, BANKRUPTCY ACCOUNTS F...

BANKRUPTCY ACCOUNTS FOR INDIVIDUALS AND PARTNERSHIPS These include a statement of affairs and deficiency account. A statement of affairs takes the following form: v\:*

BUDGETING, In the context of the public sector, discuss incremental system...

In the context of the public sector, discuss incremental system of budgeting and evaluate their strengths and weaknesses

Closing entries, Closing Entries: Expenses Below is a list of accounts with...

Closing Entries: Expenses Below is a list of accounts with corresponding ending balances. Account: Account Balance a.Insurance Expense: $1,300 b.Cash: 750 c.Accounts Receivable: 4,

Financial accounting theory, accountability through conceptual framework in...

accountability through conceptual framework in australia eassy on this topic with research

Application for grant-court jurisdiction, Court jurisdiction A court ma...

Court jurisdiction A court may limit a grant of representation which it has jurisdiction to make, as follows: 1. Where the will has been lost or mislaid since the testator's

Concept of accounting, what is the implication of applying accounting conce...

what is the implication of applying accounting concepts wrongly

What kinds of business ownership exist, What kinds of business ownership ex...

What kinds of business ownership exist? Particular form of business ownership has significant implications for accounting purposes and so it's useful to be clear about the main

5434644, gdjgjgjgf

gdjgjgjgf

State the types of business organizations, State the types of business orga...

State the types of business organizations There are numerous types of business organizations: Service business-doctors, lawyers, barber shop etc. Merchandising busin

Question, Broadway Scripts is a service-type enterprise in the entertainmen...

Broadway Scripts is a service-type enterprise in the entertainment field, and its manager, Joe Numbers, has only a limited knowledge of accounting. Joe prepared the following balan

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages