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

Evaluate weighted average cost of capital, Q. Evaluate Weighted average cos...

Q. Evaluate Weighted average cost of capital? As the investment is an extension of existing activities the risk of the investment will be estimated using the company's current

The notes to the accounts-financial statement, THE NOTES TO THE ACCOUNTS ...

THE NOTES TO THE ACCOUNTS The notes to the accounts provide additional information on the a/c policies that the company has adopted the make-up of some of the items appearing on

Choice of an appropriate discount rate, Choice of an appropriate discount r...

Choice of an appropriate discount rate The difficulty with selecting a discount rate rests on whether the correct rate for the risk/return has been derived. A number of things

ACCOUNTING DECISIONS, DO ACCOUNTANTS EVER REALLY MAKE IMPORTANT DESIONS?

DO ACCOUNTANTS EVER REALLY MAKE IMPORTANT DESIONS?

Proof of debts-bankruptcy and liquidation, PROOF OF DEBTS The following...

PROOF OF DEBTS The following rules apply as to the proving of debts: 1) A creditor has no right to vote or receive dividends until his debt is proved to the satisfaction of th

What would be the money multiplier, The SIMPLEX financial system is charact...

The SIMPLEX financial system is characterized by a required reserves ratio of 11 percent; initial excess reserves are $1 million, and there are no currency or other leakages. a.

What amount should emig report in its 2011 income statement, On its Decembe...

On its December 31, 2010 balance sheet, Emig Corp. reported bonds payable of $6,000,000 and related unamortized bond issue costs of $320,000. The bonds had been issued at par. On J

Illustration of consolidated balance sheet, Illustration of consolidated ba...

Illustration of consolidated balance sheet H Ltd owned S Ltd since the date of incorporation of S Ltd. The balance sheets of the two  companies as at 31 December 20X2 is as fo

Property in bankrupt''s reputed ownership, PROPERTY IN BANKRUPT'S REPUTED O...

PROPERTY IN BANKRUPT'S REPUTED OWNERSHIP The trustee may claim property owned by third parties which is in the bankrupt's possession at the commencement of the bankruptcy if:

Order point formula, Order Point Formula The analysis discussed above t...

Order Point Formula The analysis discussed above tends to be somewhat cumbersome when probability distributions are most complex and dependent and multi-period cases are involv

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