Setup: Packard Corp. has several new projects that look attractive, but some are riskier than the firm's past projects. Packard has received a major inflow of cash from a venture capital firm, in exchange for 25% of the firm's closely held stock. The VC firm has asked Packard managers to "run the numbers to examine both the market outlook and the expected returns on each of the projects they are considering. The cash infusion will not cover all the proposed projects; Packard and its new investors need to know which projects should be approved. 1. Based on Packard's earnings history over the past 15 years, which have covered various states of the economy, the venture capital exees want Packard to estimate their overall returns. Given the following estimates of economy over the next several years, determine Packard's expected rate of return. (6 pts) Note this be of development firm has muchwgher than normal returns under normal and boom condition. The probability of each state of the economy reflects the current station, nor necessarily historic market conditions for the firm State of the Economy Current Probability of State of the Economy Rate of Return ir State Cours Boom 10% 25.00% Normal 60% 15.00% Recession 30% -18.00% Expected return for "average" company project (based on assumed economic probabilities)