What is the expected return for the project

Assignment Help Financial Management

Reference no: EM13870743

Project A’s data is below:

If there is: Expected return Probability of occurrence

Strong demand 20% .20

Normal demand 12% .60

Weak demand 3% .20

a. What is the expected return for the project?

b. If the required rate of return is 13%, should they proceed with the project? Why?

c. You are analyzing Project B against Project A. Project B has a range of 19, which is considered more risky A or B?

d. Does this mean Project B is automatically eliminated from consideration?

Reference no: EM13870743

Questions Cloud

Using probability distribution analysis : Using probability distribution analysis, Stock B is expected to return 15%. Stock B has a beta of 1.5, the risk free rate is 2%, and the expected return of the market is 12%. Is Stock B over priced or underpriced? Why

How large is the total interest payment over the three years : If you have $30,000 in a savings account earning 10%, how large an annuity can you draw out each year if you want nothing left at the end of 8 years? You borrow $6,000 at a 10% annual rate to be repaid in 3 equal payments at the end of each of the ne..

Implementation plan for starbucks : Discuss your recommendation and implementation plan for Starbucks. Your implementation recommendation should include a timeline and description of organizational monitoring and evaluations

What is the probability that an investor in this stock : Over the past five years, a stock produced returns of 14%, 22%, -16%, 2%, and 10%. What is the probability that an investor in this stock will NOT lose more than 8% nor earn more than 21% in any one given year?

What is the expected return for the project : What is the expected return for the project? If the required rate of return is 13%, should they proceed with the project? Why? Does this mean Project B is automatically eliminated from consideration?

Using constant growth valuation formula-what is net income : Blue Company has 12,000,000 in sales. COGS are 40% of sales. Operating costs are $1,200,000plus depreciation expense of $80,000 and interest expense $80,000. Tax rate is 40%. They have 1,000,000 shares of stock outstanding. What is their net income? ..

Which security is considered more risky : Security A has a 9% expected return, 65% standard deviation. Security B has a 7% return, 50% standard deviation. Using standard deviation data alone, which security is considered more risky? You are looking at investing in SML Industries stock. Risk ..

What is the cost of equity : Johnson Tire Distributors has an unlevered cost of capital of 13 percent, a tax rate of 34 percent, and expected earnings before interest and taxes of $1,700. The company has $3,200 in bonds outstanding that have a 6 percent coupon and pay interest a..

Change in shareholders equity during year : It is true that the change in shareholders’ equity during a year is equal to the change in net assets in that year. This equation is important because:

User Account

All Pages