Suppose an investor is appraising an investment under the following conditions:a.ForecastNPVPi0.1530,00020,00015,00010,00010.1530.5040.20Find the investment's expected value, standard deviation, and the coefficient ofvariation.Would the risk-averse investor prefer this investment to a risk-free investment with aNPV of $10,000? Explain.Would the risk-averse investor prefer this investment with an expected NPV of$12,000 and a standard deviation of $12,000? Explain(ii)(iii)evaluating two risky investments, would choosing the investment with thehigher coefficient of variation imply a higher or lower degree of risk aversion? Explain youranswer. a.return for two mutually exclusive projects to determine which project should be selected.Project A has a total life of 3 years with a discount rate of 12% and Project B has a similartotal life with a discount rate of 15%. The expected cash flows of the projects are given inthe table below:Suppose you work for a small farm owner and you are asked to calculate a rate ofProject A-1,000YearProject B-8001-2,000-7003,0004,0005,000231,500Would you use the IRR method or MIRR method? State why.Applying the method chosen in part (1), what is the rate of return for each project?Which project would you recommend to the owner? State why.i.ii.ii.b. A farmer is considering replacing a labor-intensive machine system with a morecapital-intensive one. Adopting the new system is estimated to increase machinery operatingexpenses by about $21,000 per year. The new machinery will cost $30,000 plus $5,000 forshipping and installation; however, the trade-in value of the old system is $10,000. Adoptingthe new machinery will result in annual depreciation of 33.33% in year 1, 44.45% in year 2,14.81% in year 3, and 7.41% in year 4.The farmer forecasts that revenues will increase by $41,000 for each of the 4-year planninghorizon, with zero salvage value and a 20% tax rate. Find the initial cash outflow and theincremental cash flows for each year.Find the real value of a $10,000 payment due in 3 years if the expected inflationC. .rate is 5% and the time preference rate is 3%. Find the real net present value.d. A cattle rancher can afford an annual debt service payment of $10,000. What isthe maximum size loan that this rancher can borrow if the annual interest rate for a 10-yearloan is 5%?

Since multiple questions are asked , we will answer 1st question for you as per prescribed…

Suppose an investor is appraising an investment under the following conditions: a. Pi 0.15 Forecast NPV 30,000 20,000 15,000 10,000 1 2 0.15 3 0.50 4 0.20 Find the investment's expected value, standard deviation, and the coefficient of variation. Would the risk-averse investor prefer this investment to a risk-free investment with a NPV of $10,000? Explain. Would the risk-averse investor prefer this investment with an expected NPV of $12,000 and a standard deviation of $12,000? Explain (1i) (画

Suppose an investor is appraising an investment under the following conditions: a. Pi 0.15 Forecast NPV 30,000 20,000 15,000 10,000 1 2 0.15 3 0.50 4 0.20 Find the investment's expected value, standard deviation, and the coefficient of variation. Would the risk-averse investor prefer this investment to a risk-free investment with a NPV of $10,000? Explain. Would the risk-averse investor prefer this investment with an expected NPV of $12,000 and a standard deviation of $12,000? Explain (1i) (画

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 11MC: In an unrelated analysis, you have the opportunity to choose between the following two mutually...

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In an unrelated analysis, you have the opportunity to choose between the following two mutually exclusive projects, Project T (which lasts for 2 years) and Project F (which lasts for 4 years): The projects provide a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have a 10% cost of capital. (1) What is each projects initial NPV without replication? (2) What is each projects equivalent annual annuity? (3) Apply the replacement chain approach to determine the projects extended NPVs. Which project should be chosen? (4) Assume that the cost to replicate Project T in 2 years will increase to 105,000 due to inflation. How should the analysis be handled now, and which project should be chosen?