Question: A company is considering investing in a project that has an initial cost of $1,000,000 and
Fantastic news! We've Found the answer you've been seeking!
Question:
Question:
A company is considering investing in a project that has an initial cost of $1,000,000 and a payoff of $2,500,000 after 5 years. However, the company is uncertain about the actual payoff and estimates that it could range from $2,000,000 to $3,000,000 with equal probability. The risk-free interest rate is 3%.
a) Calculate the expected payoff of the project. b) Calculate the variance of the project's payoff. c) Should the company invest in the project if it requires a minimum return of 8%?
Related Book For
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
Posted Date: