Question: Suppose that Alexander Co., a U.S.-based MNC, is trying to decide the location of a new project in which they plan to invest. Alexander

Suppose that Alexander Co., a U.S.-based MNC, is trying to decide the

Suppose that Alexander Co., a U.S.-based MNC, is trying to decide the location of a new project in which they plan to invest. Alexander can invest in the new project in either the United States or Germany. Upon completion, the project will comprise 30.00% of Alexander's total invested funds, with the remaining 70.00% being invested in the United States. Forecasted information regarding the proposed project over a 5-year period, including the 70.00% of funds invested in the existing business, are shown in the following table: Mean expected annual return on investment (after taxes) Standard deviation of expected annual after-tax returns on investment Correlation of expected annual aftertax returns on investment with aftertax returns of existing U.S. business Characteristics of Proposed Project Existing Business Located in Located in United States Germany 20.00% 25.00% 25.00% 0.1 0.09 0.11 0.0087 0.0022 0.8 0.02 In the previous stage of this problem you found that the expected returns for either portfolio ntial portfolio with the Germany-based project and the potential portfolio with the U.S.-based project - were identical. Thus, Alexander wishe 0.0077 ze the risk involved with investing in each of the projects, as measured by the variance of their overall portfolio under each scenario. 0.0066 If Alexander invests in the U.S.-based project, the overall variance of their portfolio would be based project, the overall variance of their portfolio would be If Alexander invests in the Germany-

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