Question: A construction company is considering a new project that will cost $5 million to implement. The project has an expected return of 15%, but there

A construction company is considering a new project that will cost $5 million to implement. The project has an expected return of 15%, but there is a 20% chance that the project will produce a loss. The company is risk-averse and wants to ensure that its risk exposure is within acceptable limits.

a) Calculate the expected return and standard deviation of the investment.
b) Calculate the coefficient of variation (CV) for the investment.
c) Using the information in parts (a) and (b), discuss the risk-return trade-off of the investment.
d) Suppose the company decides to invest in a portfolio of projects. The company has identified two other projects that have expected returns of 10% and 20%, respectively. The standard deviation of the first project is 12%, and the standard deviation of the second project is 18%. The company wants to invest in a portfolio of these three projects that has an expected return of 15% and a standard deviation of 15%. Calculate the weight of each project in the portfolio.

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