Listed below are the annual returns associated with the large-company stock portfolio from 2010 to 2019....

  

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Listed below are the annual returns associated with the large-company stock portfolio from 2010 to 2019. Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Returns -3.20% 30.66% 7.71% 9.87% 1.29% 37.71% 23.07% 33.17% 28.58% 21.04% Calculate the variance and standard deviation of the returns. Question# 3 Mike Jordan is a new project analyst; he is working on capital budgeting analysis of two mutually exclusive projects. The followings are the cash flow forecasts for both the projects. Year 0 1 2 3 4 5 Project A Expected Cash flows (1000,000) 50000 200,000 600,000 1000,000 1500,000 Project B Expected Cash flows ($900,000) 650,000 650,000 550,000 300,000 100,000 The following metrics presents the key information based on capital budgeting indicators. For purposes of analysis, he plans to use a required rate of return of 20% for both projects. Ideally, he would prefer that the project he chooses to have a payback period of less than 3.5 years and a discounted payback period of less than 4 years. Please calculate the missing values in the table and help Mr. Jordan to decide which project to select and why? Answer: Metrics Payback period (in years) Discounted payback period (in years) Net Present Value (NPV) Internal Rate of Return (IRR) Profitability Index Accounting Rate of Return (ARR) Project A 1.52 Project B 1.58 Question# 1 Ahmad and Ayed were having a discussion about which financial model to use for their new business. Ahmad supports NPV and Ayed supports IRR. The discussion starts to get heated when Fahad steps in and states. "Gentlemen, it doesn't matter which method we choose, they give the same answer on all projects." Is Fahad correct? Under what conditions will IRR and NPV be consistent when accepting or rejecting projects? Answer: Question# 2 Consider projects A and B: Project A B Co -30,000 -50,000 Cash Flows (Dollars) C1 21,000 33,000 a) Calculate NPV & IRRs for A and B at 10% discount rate. b) Which project does the IRR rule suggest is best? c) Which project is really best? Answer: C₂ 21,000 33,000 Listed below are the annual returns associated with the large-company stock portfolio from 2010 to 2019. Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Returns -3.20% 30.66% 7.71% 9.87% 1.29% 37.71% 23.07% 33.17% 28.58% 21.04% Calculate the variance and standard deviation of the returns. Question# 3 Mike Jordan is a new project analyst; he is working on capital budgeting analysis of two mutually exclusive projects. The followings are the cash flow forecasts for both the projects. Year 0 1 2 3 4 5 Project A Expected Cash flows (1000,000) 50000 200,000 600,000 1000,000 1500,000 Project B Expected Cash flows ($900,000) 650,000 650,000 550,000 300,000 100,000 The following metrics presents the key information based on capital budgeting indicators. For purposes of analysis, he plans to use a required rate of return of 20% for both projects. Ideally, he would prefer that the project he chooses to have a payback period of less than 3.5 years and a discounted payback period of less than 4 years. Please calculate the missing values in the table and help Mr. Jordan to decide which project to select and why? Answer: Metrics Payback period (in years) Discounted payback period (in years) Net Present Value (NPV) Internal Rate of Return (IRR) Profitability Index Accounting Rate of Return (ARR) Project A 1.52 Project B 1.58 Question# 1 Ahmad and Ayed were having a discussion about which financial model to use for their new business. Ahmad supports NPV and Ayed supports IRR. The discussion starts to get heated when Fahad steps in and states. "Gentlemen, it doesn't matter which method we choose, they give the same answer on all projects." Is Fahad correct? Under what conditions will IRR and NPV be consistent when accepting or rejecting projects? Answer: Question# 2 Consider projects A and B: Project A B Co -30,000 -50,000 Cash Flows (Dollars) C1 21,000 33,000 a) Calculate NPV & IRRs for A and B at 10% discount rate. b) Which project does the IRR rule suggest is best? c) Which project is really best? Answer: C₂ 21,000 33,000