Return on Investment Probability Project A Project B 0.10 -20% -35% 0.20 -10% 0.25 10% 15% 0.30 15% 25% 0.10 20% 40% 0.05 40% 50%

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 10E
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You are considering investing in one of two projects, which have the following returns and probabilities of occurrence:

(a) Compute the mean return for each project.
(b) Compute the variance of return for each project.
(c) Which project would you prefer, and why?

Return on Investment
Probability
Project A
Project B
0.10
-20%
-35%
0.20
-10%
0.25
10%
15%
0.30
15%
25%
0.10
20%
40%
0.05
40%
50%
Transcribed Image Text:Return on Investment Probability Project A Project B 0.10 -20% -35% 0.20 -10% 0.25 10% 15% 0.30 15% 25% 0.10 20% 40% 0.05 40% 50%
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