Imperial plc, a UK multinational corporation financed by only equity is looking into venturing into the...

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Imperial plc, a UK multinational corporation financed by only equity is looking into venturing into the overseas market. It is evaluating whether it should set up a plant in Malaysia. The project expected payoff is determined by the state of economy in Malaysia as the following: State of the Malaysian Economy A B с D Probability Required: (a) 0.2 0.3 0.2 0.3 Project Internal Rate of Retun (%) 20 30 20 30 Imperial's current business activities are expected to produce 40% rate of return with a standard deviation of 24%. Imperial's returns possess a correlation coefficient of - 0.46 with the new project. Its returns also have a correlation coefficient of 0.90 with the market portfolio return and the new project possesses a correlation coefficient of - 0.20 with the market portfolio in the UK. Imperial's beta coefficient is 1.30 The rate of return from investing in government bonds is 13% The risk premium for the market portfolio in the UK is 16% The stock prices at the London Stock Exchange (LSE) in which Imperial's stock is listed is assumed to be efficient. Find out the expected return and standard deviation of the new project's return. Imperial plc, a UK multinational corporation financed by only equity is looking into venturing into the overseas market. It is evaluating whether it should set up a plant in Malaysia. The project expected payoff is determined by the state of economy in Malaysia as the following: State of the Malaysian Economy A B с D Probability Required: (a) 0.2 0.3 0.2 0.3 Project Internal Rate of Retun (%) 20 30 20 30 Imperial's current business activities are expected to produce 40% rate of return with a standard deviation of 24%. Imperial's returns possess a correlation coefficient of - 0.46 with the new project. Its returns also have a correlation coefficient of 0.90 with the market portfolio return and the new project possesses a correlation coefficient of - 0.20 with the market portfolio in the UK. Imperial's beta coefficient is 1.30 The rate of return from investing in government bonds is 13% The risk premium for the market portfolio in the UK is 16% The stock prices at the London Stock Exchange (LSE) in which Imperial's stock is listed is assumed to be efficient. Find out the expected return and standard deviation of the new project's return.

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