A firm wants to select one new research and development project. The following table summarizes six possibilities.

Question:

A firm wants to select one new research and development project. The following table summarizes six possibilities. Considering expected return and risk, which projects are good candidates? The firm believes it can earn 5% on a risk-free investment in government securities (labeled as Project F).

Standard Deviation Project IRR 6.5% 15.8% 4.1, 12.0 3 10.4 6.3 4 12.1 5.1 14.2 8.0 5.0 0.0

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...