Project Mills yields a net present value of 10 in state Up and -6 in state Down, while Project Tola yields a net present value of 21 in state Up and -11 in state Down. The two states occur with equal probabilities.a) Check whether one project dominates the other based on expected net present value and coefficient of variation, and based on expected net present value and semi variance, assuming that the investor is risk-averse.b) Check whether one project may be ranked above the other based on stochasticdominance.c) If you use the utility function U(X) = (X+15)0.5 as the basis for choosing projects(X represents net present value), how do you rank the projects in that case?Comment upon your result.Calculate the related risk premium for each project.d) If you have the opportunity to invest a proportion of 0.4 in Mills and a propor-tion of 0.6 in Tola, what will be the expected utility of your portfolio?Calculate the risk premium for this portfolio.

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a To determine whether one project dominates the other we can compare their expected net present values ENPVs and coefficients of variation CVs or sem... View the full answer