+1-415-670-9189
info@expertsmind.com
Expected value and standard deviation of profit
Course:- Microeconomics
Reference No.:- EM13700181




Assignment Help
Assignment Help >> Microeconomics

Jamie Dixon is the operations manager for Pitt Corp, a real estate investment firm. Jamie must decide if Pitt Corp is going to invest in a strip mall in Oakland. If the strip mall is highly successful, after tax profits will be $100,000 per year. Moderate success would yield an annual profit of $50,000, while the project will lose $10,000 per year if it is unsuccessful. Past experience suggests that there is a 40% chance that the project will be highly successful, a 40% chance of moderate success, and a 20% probability that the project will be unsuccessful. The project requires an $800,000 investment. If Pitt Corp has an 8% opportunity cost on invested funds of similar riskiness, should the project be undertaken? In your answer, calculate the expected value and standard deviation of profit.  




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Microeconomics) Materials
Calculate a marginal cost and an average cost schedule for the firm. If the prevailing marketing price is $17 per unit, how many units will be produced and sold. What are the
Should food and beverage advertising to children be banned? What about for other types of products as well? Is it unethical for food companies to target their ads towards chil
While it's true that we should ignore sunk costs, at least this way we can cut our losses somewhat."?Who's correct? Why? What should PQR do? Why - Should the firm invest in
The campaign works! Prune juice sales soar, even though Sunsweet hasn't cut the price. Draw a budget constraint and indifference curve diagram with Sunsweet prune juice on o
Evaluate the financial statements and the financial position of health care institutions and describe the overall planning process and the key components of the financial plan
Using the midpoint formula for calculating the elasticity of demand, if the price of a good fell from $42 to $38, what would be the elasticity of demand if the quantity dema
A solar-water heating system uses solar panels on the roof of a large build, 40.0 m above the storage tank. The pressure at the panels is 1 atmosphere. What is the absolute pr
What is the new quantity of private investment and the new equilibrium interest rate in this market? Draw a graph of the loanable funds market illustrating both the initial s