Describes the investment with the least amount of risk

Assignment Help Financial Management

Reference no: EM131924597

The answer choices provided describe four different investments. Which answer choice describes the investment with the least amount of risk?

a. Standard deviation = $600, expected return = $400

b. Standard deviation = $500, expected return = $800

c. Standard deviation = $450, expected return = $4,500

d. Standard deviation = $400, expected return = $5,000

2. Harmony Industries uses the following table of risk-adjusted discount rates to analyze projects.

coefficient of variation . Discount rate

0-25......................................6%

.26-.50..................................8

.51-.75.................................10

.76-1.00...............................14

1.01-1.25............................20

The company is considering a $70,000 project. The coefficient of variation for the project is 0.847. Assume that the project generates the following cash flows:

Year cash flows

1...............$11,000

2.................16,000

3................21,000

4..................24,000

5..................30,000

Select the appropriate discount rate and compute the net present value. Should the project be undertaken?

a. The project should not be undertaken because the NPV is -$2,987.

b. The project should be undertaken because the NPV is $1,870.

c. The project should be undertaken because the NPV is $3,457.

d. The project should not be undertaken because the NPV is -$4,096.

Reference no: EM131924597

Questions Cloud

What kind of visual technique would help the style most : What kind of visual technique would help this style most? Sketch an ad layout, and write a rough draft for the text. Look critically at your visual device.

Firm required rate of return : If the tax rate on ordinary income is 40 percent and the firm’s required rate of return is 16 percent, should the firm purchase the system? Why?

How lighting is used to enhance or detract from production : Describe how lighting is used to enhance or detract from the production. Explain what the symbols are and how their usage affects the overall production.

What are some of the nonverbal communication norms : What are some of the nonverbal communication norms for this culture?

Describes the investment with the least amount of risk : The answer choices provided describe four different investments. Which answer choice describes the investment with the least amount of risk?

Define or explain your call into the ministry : This project has been designed so that you can learn to define/explain your call into the ministry and show why you are pursuing education in order to support.

Weighted average cost of capital appropriate discount factor : In evaluating new projects when is the weighted average cost of capital the appropriate discount factor and when is it not?

How you will create buy-in among invested parties : CJ 500 Propose a solution to address the issue in criminal justice, justifying your proposal with your previous research

Discuss about an important marketing concept : Write a response about this article and what you find to be an important marketing concept/strategy to consider when dealing with products in the decline stage.

User Account

All Pages