Question: 1. a) Anderson Associates is considering two mutually exclusive projects that have the following cash flows: Year Project A Cash Flow Project B Cash Flow
1. a) Anderson Associates is considering two mutually exclusive projects that have the following cash flows:
| Year | Project A Cash Flow | Project B Cash Flow |
| 0 | -$11,000 | -$9,000 |
| 1 | 3,500 | 6,000 |
| 2 | 3,000 | 4,000 |
| 3 | 5,000 | 3,000 |
| 4 | 9,000 | 2,000 |
At what cost of capital do the two projects have the same net present value?
b)
| Ripken Iron Works believes the following probability distribution exists for its stock. What is the standard deviation of return on the company's stock? | ||||||
| State of the Economy | Probability of State Occurring | Stock's Expected Return | ||||
| Boom | 0.25 | 35% | ||||
| Normal | 0.45 | 13% | ||||
| Recession | 0.30 | -22% | ||||
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