Answered: An expansion project that has an…

An expansion project that has an expected return of 25% and a standard deviation of 30%. Find the project's coefficient of variation? a) 1.32 b) 0.83 c) 1.20 d) 1.39 e) 1.26

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 4P

See similar textbooks

Related questions

Q: n dealing with IRR and NPV project evaluations, there is something called a crossover rate. Using…

A: To Find: Crossover rate

Q: b) For a project that has a net investment of $150,000 and net cash flows of $40,000 for 5 years; Is…

A: Note: It is a case where the number of questions asked is more than one and no specified question is…

Q: A company estimates that its average-risk projects have a WACC of 10%, its below-average risk…

A: WACC of below average risk project = 8% WACC of average risk project = 10% WACC of above average…

Q: The four alternatives described below are being evaluated.a. If the proposals are independent, which…

A: The minimum possible required return at which a company is willing to invest its funds is term as…

Q: A project under consideration has an internal rate of return of 13% and a beta of 0.6. The risk-free…

A: Internal rate of return is the rate at which net present value of the project (net present value of…

Q: A project has an expected net present value of $50,000 with a standard deviation of the net present…

A: The provided information are: Expected net present value = $50000 Standard deviation of net present…

Q: A project has an expected net present value of $50,000 with a standard deviation of the net present…

A: Net Present Value is defined as the difference between the cash flows of the present value and cash…

Q: The five alternatives shown here are being evaluated by the rate of return method: If the…

A: Companies have different alternatives to invest their money in, but they should always compare the…

Q: Standard deviation versus coefficient of variation as measures of risk Greengage Inc., a successful…

A: The risk of an asset can be measured using its range. The range can be calculated considering the…

Q: Please help to solve all the below :) What is the average return per year for a project that has…

A: In this rate of return depends on initial investment and annual returns from projects.

Q: Your expectations from a one year investment in Wang Computers are as follows:…

A: Given: Given:

Q: The data related to a project with an investment amount of 10.000.000 TL is as follows, and the…

A: The calculation is shown as:

Q: The probability distribution of possible net present values for project X has an expected value of…

Q: Huang Industries is considering a proposed project whose estimated NPV is $12 million. This es…

A: Answer - Calculation of Expected NPV - The expected NPV of the project is the probability…

Q: A project under consideration has an internal rate of return of 13% and a beta of 0.8. The risk-free…

A: CAPM is the model of valuing the required rate of return an investor wants from a company, It is the…

Q: A project has an expected NPV of $50,000 with a standard deviation of the NPV of $20,000. Assume…

A: Z score calculates the distance between mean value and given data point.

Q: An IT Project with MARR=10%. If this investment is tested at i=15%, its NPV is +$4550 at i=15%; and…

A: IRR can be computed as follows

Q: A project under consideration has an internal rate of return of 16% and a beta of 0.9. The risk-free…

A: First we need to calculate required rate of return based on CAPM. The equation is Required rate of…

Q: A project’s coefficient of variation is 0.55. The project has a positive coefficient of correlation…

A: Given that: Expected value = $1200 Coefficient of Variation = 0.55

Q: Suppose the MARR is 10% with probability 0.25, 12% with probability 0.50, and 15% with probability…

Q: Consider the following information regarding a new investment that a company intends to undertake:.…

A: Calculation of standard deviation and variance of each return: Excel workings:

Q: Two mutually exclusive investment projects are under consideration. It is assumed that the cash…

A: Present worth of a project is the present value of all cash inflows and outflows of a project. A…

Q: Standard deviation versus coefficient of variation as measures of risk. Bluecage, Inc., a successful…

A: Data given: Project Expected Return (%) Range Standard Deviation A 12.0 0.040 0.029 B 12.5…

Q: An initial investment of £80,000 has an interim return of £30,000 in year 5 and a final return of…

A: The IRR is the discount rate where the cash outflows are equal to the cash inflows and the net…

Q: A ) For a rate of return of 15%, calculate the net present value (NPV), THEN Calculate the present…

A: Information Provided:

Q: There are two projects, A and B. the following probability distribution for the projects are given…

A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…

Q: At a discount rate of 8% the Net Present Value (NPV) of a project is 65 million. At a discount rate…

A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…

Q: You are evaluating the following four projects: Project Beta Projected (or Expected) Return A 1.80…

A: According to CAPM Expected return =Risk free rate +Beta x market risk premium

Q: A project under consideration has an internal rate of return of 18% and a beta of 0.5. The risk-free…

A: Since you have asked a question with multiple parts, we will solve the first 3 parts for you. Please…

Q: return

A: Introduction: To calculate the return which is expected by the investors, CAPM or capital asset…

Q: Project A has expected return of K500,000 while project B has expected return of K100,000. The…

A: Expected return of A = K 500000 Expected return of B = K 100000 Variance of A = K 25000000 Variance…

Q: If the profitability index of a normal investment project is 0.5 and the initial investment required…

A: A Profitability index is a useful tool that is used by the management in order to the ranking of the…

Q: 30- If an investment is producing an internal rate of return that is equal to the required return,…

A: Internal rate of return can be defined as rate at which the present value of firm’s cash outflow is…

Q: A project under consideration has an internal rate of return of 17% and a beta of 0.5. The risk-free…

A: “Since you have posted a question with multiple sub-parts, we will solve the first three subparts…

Q: A project under consideration has an internal rate of return of 18% and a beta of 0.5. The risk-free…

A: Part (a): Calculation of required rate of return on project: Answer: Required rate of return is 12%

Q: The expected net present value of the project is Standard deviation of the net present value (the…

A: B. Sensitivity analysis is the analysis that shows change in dependent variaBle due to change in…

Q: A project with an initial cost of GH¢ 10,000 has the following forecasted cash flows. Years Cash…

A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: A project has a 0.6 chance of tripling your investment in a year and a 0.4 chance of halving your…

A: Standard deviation =square root of sum of Probability*(Return-Mean)^2

Q: Assume that a project is expected to produce the following cash flows in each year, each periodic…

A: NPW FORMULA: NPW = -initial value +present value of future cashflow

Q: Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate…

A: Given, The NPV of the project with different probabilities.

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

An expansion project that has an expected return of 25% and a standard deviation of 30%. Find the project's coefficient of variation?

a) 1.32

b) 0.83

c) 1.20

d) 1.39

e) 1.26

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Scenario Analysis Shao Industries is considering a proposed project for its capital budget. The company estimates the projects NPV is 12 million. This estimate assumes that the economy and market conditions will be average over the next few years. The companys CFO, however, forecasts there is only a 50% chance that the economy will be average. Recognizing this uncertainty, she has also performed the following scenario analysis: What are the projects expected NPV, standard deviation, and coefficient of variation?
Giorgio Co. is looking at an investment project with an internal rate of return of 10.8%. The initial outlay for the investment is $90,000. The hurdle rate or minimum acceptable rate of return is 10.2%.
A project has an expected net present value of $50,000 with a standard deviation of the net present value of $20,000. Assume that NPV is normally distributed. What is the probability that the project will have a negative NPV?
The return expected from the project no. 542 is 22 percent. The standard deviation of these return is 11 percent. If returns from the project are normally distributed. What is the chance that the project will result in a rate of return above 33 percent?
A project has an expected NPV of $50,000 with a standard deviation of the NPV of $20,000. Assume that NPV is normally distributed. What is the probability that the project will have a net present value greater than $60,000?
You estimate that a planned project for your company has a 0.3 chance of tripling the investment in a year and a 0.7 chance of halving the investment in a year. What is the standard deviation of the return on this project? A.1.5625 B.1.3126 C.1.2247 D.1.1457
Your expectations from a one year investment in Wang Computers are as follows: Probability Rate of Return .15 -.10 .15 -.20 .35 .00 .25 .15 .10 .15 expected rate of return? standard deviation? coeefecient of variation on investment?
A project’s coefficient of variation is 0.55. The project has a positive coefficient of correlation of 0.20. The expected value is $1,200. What is the standard deviation?
Suppose you have a project that has a 0.4 chance of tripling your investment in a year and a 0.6 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) What is the standard deviation?
A project has a 0.68 chance of doubling your investment in a year and a 0.32 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment?
. There are three possible states of economy-Boom, Growth or Recession and the returns on Ihser and Resque depend on which state will occur.T he details for these projects are as follows: State of the economy Probability of the state of the economy occurring Ihser(%) Resque(%) Boom 0.25 40 10 Growth 0.55 30 15 Recession 0.20 -10 20 (a) Calculate the expected return and standard deviation for each project (b) What are the covariance and correlation coefficient between returns of Ihser and Resque
Project A has expected return of K500,000 while project B has expected return of K100,000. The variances for A and B are K25, 000,000 and K1, 000,000 respectively. a) Compute the coefficient of variation for the two projects b) Which of the two projects is more risky? c) The risky cash flow for project D is K150,000 in perpetuity and the risk adjusted return is 15%. What are the certainty equivalent cash flows when the risk free rate is 10% d) Should project D be accepted if it costs K105,000?