Question: Q3. A company is considering a 2-year project, project A, involving an initial investment of $600 and the following cash flows and probabilities: Year 1

Q3. A company is considering a 2-year project, project A, involving an initial investment of $600 and the following cash flows and probabilities:

Year 1

Year 2

Probability

Cash Flow

Probability

Cash Flow

0.1

$700

0.2

$600

0.4

600

0.3

500

0.4

500

0.3

400

0.1

400

0.2

300
  1. Calculate the project expected NPV (net present value) and the standard deviation, assuming the discount rate to be 8%.
  2. The company is also considering another 2-year project, project B, which has an expected NPV of $320 and a standard deviation of $125. Project A and B can not be implemented at the same time (mutually exclusive). Which of the two projects would you prefer? Explain?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

Problem 13-54 (LO 13-1) (Algo) [The following information applies to the questions displayed below.] Javier recently graduated and started his career with DNL Incorporated DNL provides a defined...

Q:

# 1 5 The Cactus Corporation is considering a 2 - year project, project A , involving an initial investment of $ 6 0 0 and the following cash inflows and porbabilities: Year 1 Year 2 Profitability...

Q:

please help A company is considering a new line which will require an initial investment of $325,000. Free cash flows expected as a result of this project are shown below. At the end of the final...

Q:

Your company is considering a project with the following cash flows: Initial Investment is $1,500,000 The cash flows year 1-6 is $410,000 Compute the internal rate of return on the project to the...

Q:

Economics of Risk and Uncertainty Applied Problems Please complete the followingtwo applied problems. Show all your calculations and explain your results. Problem 1: A generous university benefactor...

Q:

15. The Cactus Corporation is considering a 2-year project, project A, involving an initial invest men t of $600 and the following (ash inflows and probabilities: a. Calculate the project's expected...

Q:

The San Diego LLC is considering a three-year project, Project A, involving an initial investment of $80 million and the following cash inflows and probabilities: Year 0 Year 1 Year 2 Year 3...

Q:

Following is information on an investment considered by Hudson Co. Assume the investment has a salvage value of $34,000. The company requires a 6% return from its investments. Investment A1 Initial...

Q:

Following is information on two alternative investments projects being considered by Tiger Company. The company requires a 12% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of...

Q:

A company is considering a 5-year project. It plans to invest $60,000 now and it forecasts cash flows for each year of $16,000. The company requires a hurdle rate of 12%. Selected factors for the...

Q:

please correct answers only!!! Following is information on two alternative Investments. Beachside Resort is considering building a new pool or spa. The company requires a 10% return from its...

Q:

If an owner withdraws cash for personal use, the transaction should be recorded in the A) sales journal. B) cash receipts journal. C) general journal. D) cash payments journal.

Q:

Why has the PCM sampling time been set at 125 sec?

Q:

P7.33 The Bell-Boeing V-22 Osprey Tiltrotor is both an airplane and a helicopter. Its advantage is the ability to rotate its engines to 90 from a vertical position for takeoffs and landings as shown...

Q:

What must be the pressure difference between the two ends of a 1.9-km section of pipe. 29cm in diameter, if it is to transport oil (p = 950kg/m3.n = 0.20Pa s) at a rate of 450 cm3/s?

Q:

(a) Calculate the force FM, required of the deltoid muscle to hold up the outstretched arm shown in Fig. 9-45. The total mass of the arm is 3.3 kg. (b) Calculate the magnitude of the force FJ exerted...

Q:

A sign (mass 2100kg) hangs from the end of a vertical steel girder with a cross-sectional area of 0.15m2. (a) What is the stress within the girder? (b) What is the strain on the girder? (c) If the...

Q:

If a compressive force of 3.6 X 104 N is exerted on the end of a 22-cm-long bone of cross-sectional area 3.6 cm2, (a) Will the bone break, and (b) If not, by how much does it shorten?

Q:

Knowing that WA = 40lb, WB = 52 lb, and θ =25°, determine (a) Whether the system is in equilibrium, (b) The magnitude and direction of the friction force. H, =0.35 H =0.25

Q:

Realiza un cuadro comparativo donde analices y expliques: Las diferencias y semejanzas entre los diferentes tipos de auditora incluyendo la auditoria adminstrativa

Q:

Is there anything wrong, from an HRM perspective, with the expansion plans?

Q:

Given that Ravi has no access to immediate funds and cannot give salary increases to other employees, what should he do next? Clearly outline a strategic plan of action that he should follow. Ravi...

Q:

If you could build your own total rewards program, what would be the components? Explain your answer. One answer is to ask employees, although there might be concern that by asking, employees will...