Note:-Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure. The results of a scenario analysis on a proposed project are listed below.State of the EconomyProbabilityRecessionNormalBoom0.250.50.25What is the standard deviation for these results?NPV$$$(15,000.00)20,000.0055,000.00 O $18,750O $21,067O $20,994O $20,000

Net present value is determined by deducting the initial investment from the current value of cash…

Answered: What is the standard deviation for…

Business

Finance

What is the standard deviation for these results?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EB: Wallace Company is considering two projects. Their required rate of return is 10%. Which of the two...

See similar textbooks

Related questions

Q: You are a consultant who has been hired to evaluate a new product line for Markum Enterprises. The…

A: The net present value illustrates a project's profitability. A useful metric for assessing an…

Q: Klp.6 Using the data in the table, calculate the operating cash flow for Cyberdyne. Round your…

A: Operating cash flows refer to the company's cash flows generated periodically through the business…

Q: Chauhan Restaurant is considering the purchase of a soufflé maker that costs $11,100. The soufflé…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: The Campbell Company is considering adding a robotic paint sprayer to its production line. The…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: project L costs $65,000, its expected cash inflows are $10,000 per year for 8 years, and its WACC is…

A: The tool called "MIRR" is one of the capital budgeting methods which is the advanced version of the…

Q: Informics, Inc. is building fifth-generation software. The software quality initiatives will cost…

A: A capital-budgeting approach termed net present value (NPV) is commonly employed for assessing…

Q: An amount of $14951 is deposited into a fund that earns a nominal annual rate of interest is 4.4%…

A: A series of payments made at the end of each perod with equal intervals of time is an ordinary…

Q: A financier has made a loan of $13 million. The contract for the loan calls for payment of interest…

A: Future value refers to the value of the present asset at some future date affected by inflation,…

Q: Please do this in Excel using relevant formulas. Stock A has a beta of 0.5, and investors expect it…

A: CAPM stands for capital asset pricing model. CAPM shows the relationship between expected return and…

Q: You want to buy a $182,000 home. You plan to pay 20% as a down payment, and take out a 30 year loan…

A: A= 182,0000t= 30 yearsDown Payment = 20%

Q: XYZ Limited has 30 million equity shares outstanding. The book value per share is ₹60 and the market…

A: Capital structure refers to the mix of long-term funding sources that a company uses to operate and…

Q: Even though most corporate bonds in the United States make coupon payments semiannually, bonds…

A: Compound = Annually Face Value = fv = 1000Time = 12 YearsCoupon Rate = c = 8%Yield to Maturity = r =…

Q: (Profitability analysis) Last year Triangular Resources earned $4.5 million in net operating income…

A: Investment in total assets can be calculated by using the following ratiosOperating profit margin =…

Q: Fuji Software Inc. has the following mutually exclusive projects. Project Project Year 0 4…

A: Project A:Cash flow 0 =-$32,000Cash flow 1 = $18,000Cash flow 2 = $14,500Cash flow 3 = $4,100Project…

Q: Tyrell Corp. is considering replacing a machine. The old one is currently being depreciated at…

A: The comparison of the present value of cash inflows and outflows over time is made with the help of…

Q: A savvy investor paid $5,000 for a 20-year $10,000 mortgage bond that had a bond interest rate of 2%…

A: Yield to maturity can be calculated by following function in excel=RATE (nper, pmt, pv, [fv],…

Q: Find the delta of the chooser option.

A: The delta of a chooser option is the rate of change of its price with respect to the price of the…

Q: (Related to Checkpoint 12.1) (Calculating changes in net operating working capital) Tetious…

A: Free cash flow is the free money that a business or organization has available, This money is used…

Q: The Snedecker Corporation is considering a change in its cash-only policy. The new terms would be…

A: = Sales*(selling price- cost price) = 2,150*(53-31)= 47,300

Q: A 5-year government bond has an annual coupon of calculate: a) the price, b) Macaulay duration and;…

A: Price of bond is the present value of the coupon interest payments plus present value of face value…

Q: 7. Ahmed is strategizing to add option investment for short term on ABC stock that is currently…

A: Option Market is a Stock Market Strategy. Under which investor will not purchase the shares of the…

Q: (Evaluating liquidity) The Allen Marble Company has a target current ratio of 2.0 but has…

A: The objective of the question is to find out how much additional short-term funding Allen Marble…

Q: Suppose that a bond makes annual coupon payments at a 7% coupon rate, has 10 years until maturity,…

A: Here, ParticularsValuesFace value of the bond (FV) $ 1,000.00Coupon rate7%Term till maturity…

Q: 6.If the current value of $1000 received five years from now is $680.50, what is the assumed…

A: Annual interest rate refers to the rate that is being charged by the lender by the borrower on the…

Q: Preferred stock Common equity (retained earnings) Debt Additional information: Corporate tax rate…

A: WACC means Weighted average cost of capital.It is calculated as follows:-WACC…

Q: KT Enterprises is considering undertaking a new project. Based upon the analysis of firms with…

A: equity cost of capital will be calculated by following formula:- rE = rU + [ * (rU-rD)]whererE=…

Q: a. Calculate the maturity value of the investment. (Use the Table 12.1 provided.) Note: Do not round…

A: The future value of an investment forecasts the expected value of an investment at a given future…

Q: A project will generate before tax cost savings of $110,000 per year, for five years, create…

A: When the company's accounts receivables. inventory and accounts payables are given the evaluator of…

Q: Discuss the importance and purposes of audits in an organisation. Identify the possible Reporting…

A: Audits play a pivotal role in ensuring the reliability and integrity of financial information in…

Q: Required information [The following information applies to the questions displayed below) On January…

A: Here,Details of Part c:First Payment in $75,000Second Payment is $112,500Third Payment is $150,000

Q: There is a zero coupon bond that sells for $500 and has a par value of $1,000. If the bond has 20…

A: In zero coupon bonds there is no coupon and par value is paid on the maturity and discount is profit…

Q: A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0 1…

A: Capital budgeting techniques are used to evaluate potential long-term investments in projects or…

Q: Bearcat Corporation is offering bonds to the market with a coupon of 15 percent. The bonds make…

A: The current worth of the bond can be found by using the PV function in the Excel sheet where the…

Q: Given that Local Care, Inc.'s stock is currently selling for $65 a share, calculate the amount of…

A: Variables in the given question:Current price of stock= $65 per shareNo. of shares involved in…

Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…

A: Expected return of portfolio willl be calculated as follows:-Rp = (Rs*Ws)+(Rb*Wb)whereRp= Expected…

Q: Blue Hamster Manufacturing Inc. is considering a one-year project that requires an initial…

A: Flotation cost refers to the cost of raising the funds for the initial investment from market…

Q: In each of the following cases, find the unknown variable: (Do not round intermediate calculations…

A: We need to use accounting break-even formula to calculate unknown variables.

Q: One-year T T-bills currently earn 0.46 percent. You expect that one year from now, one-year T-bill…

A: Current rate on two year treasury securities= ((1 + one year T-bill rate) * (1 + Expected one year…

Q: Minnesota Metal Forming Company has just invested $500,000 of fixed capital in a manufacturing…

A: Internal Rate of Return (IRR) is the discount rate at which NPV (Net present value) is zero.Net…

Q: A portfolio has an expected return of 16.78% and a variance of 1.03%. If the risk-free rate is…

A: The Sharpe ratio refers to the return of the portfolio that is adjusted for risk to determine the…

Q: Fun Land is considering adding a miniature golf course to its facility. The course would cost…

A: Net present value(NPV) is the difference between present value of all cash inflows and initial…

Q: An 9% coupon U.S. Treasury note pays interest on May 30 and November 30 and is traded for settlement…

A: The objective of this question is to calculate the accrued interest on a U.S. Treasury note with a…

Q: The newspaper reported last week that Bennington Enterprises earned $34.09 million this year. The…

A: Earning growth rate can be calculated by multiplying the ROE with retention ratio. Earning growth…

Q: You have the opportunity of making a $5,000 investment. The outcomes one year from now will be…

A: In this question, we are required to determine the expected rate of return.

Q: Emilo is a seaman in the U.S. Navy who served in a combat zone from January 30, 2022 to July 3,…

A: The objective of the question is to determine the number of months of Emilo's income that are…

Q: If the number of people infected by the covid-19 virus is now doubling every 10 days, what is the…

A: In this question, we are required to determine the daily growth rate.

Q: Your grandfather is retiring at the end of next year. He would like to ensure that his heirs receive…

A: Present value= Annual cash flows / Discounting rate= 96666.666666666666667= 96666.67 Approx

Q: Please show your work, thanks!! A firm is expected to pay an annual dividend of $1.20 in one year.…

A: We need to use constant growth model equation to calculate growth rateP0 = D1 /(rs-g) Where P0 =…

Q: Government of Canada bonds are being issued with a YTM of 2%. What should the price of your…

A: Bond valuation entails determining the present value of a bond's future cash flows, which include…

Q: You can lease a vehicle today for 36 months. The dealer will guarantee a residual value of $10,000.…

A: Net Present Value= Cash price of car - Present value of Residual value = 38000 - 10000 /…

Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

Note:-

Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.

The results of a scenario analysis on a proposed project are listed below.
State of the Economy
Probability
Recession
Normal
Boom
0.25
0.5
0.25
What is the standard deviation for these results?
NPV
$
$
$
(15,000.00)
20,000.00
55,000.00

Expert Solution

This question has been solved!

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

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction:

VIEW

Step 2: Computation of standard deviation:

VIEW

Solution

VIEW

Step by step

Solved in 3 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

Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site. Gardial Fisheries is considering two mutually exclusive investments. The projects expected net cash flows are as follows: a. If each projects cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice? b. Construct NPV profiles for Projects A and B. c. What is each projects IRR? d. What is the crossover rate, and what is its significance? e. What is each projects MIRR at a cost of capital of 12%? At r = 18%? (Hint: Consider Period 7 as the end of Project Bs life.) f. What is the regular payback period for these two projects? g. At a cost of capital of 12%, what is the discounted payback period for these two projects? h. What is the profitability index for each project if the cost of capital is 12%?
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 $90,000. The hurdle rate or minimum acceptable rate of return is 10.2%.
Wallace Company is considering two projects. Their required rate of return is 10%. Which of the two projects, A or B, is better in terms of internal rate of return?
The Webex Corporation is trying to choose between the following two mutually exclusive designprojects: Year Net Cash Flow Project - I($) Net Cash Flow Project - II($) 0 (53,000) (16,000) 1 27000 9100 2 27000 9100 3 27000 9100 (a) If the required return is 10% and the company applies the Profitability Index decision rule,which project should the firm accept?(b) If the company applies the Net Present Value decision rule, which project should it take?(c) Explain why your answers in (a) and (b) are different(d) Calculate the Internal Rate of Return of both projects.
Consider the following cash flows:Year Cash Flow0 -$8,0001 $3,0002 $3,6003 $2,7004 $2,5005 $2,1006 $1,600 1. NPV. Using a 10% required rate of return, calculate the NPV for this project. Should it be accepted or rejected? 2. PI. Calculate the Profitability Index (PI) for this project. Should it be accepted or rejected?
Viva's Junkshop is considering a project that has the following cash flow and WACC data. What is the project's NPV? WACC: 10.00% Year 0 1 2 3 Cash flows -$1,050 $450 $460 $470 Choices are the ff: A.$ 92.37 B. $96.99 C. $101.84 D. $112.28 E. $106.93
Cornell Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV?Note that a project's projected NPV can be negative, in which case it will be rejected. WACC: 10.00%Year 0 1 2 3Cash flows −$1,050 $450 $460 $470
Cornell Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's projected NPV can be negative, in which case it will be rejected. WACC: 10.00% Year 0 1 2 3 Cash flows -$1,325 $450 $460 $470 a. -$182.63 b. -$68.39 c. -$70.45 d. -$288.19 e. -$166.0
Compute the MIRR statistic for the following project and indicate whether the firm should accept or reject this project if the appropriate cost of capital is 8.5%. Project cash flows Time 0 1 2 3 4 5 Cash flow -4800 3000 2200 1600 -500 -1000
Consider the following cash flows: Year 0 1 2 3 4 5 6 Cash Flow -$9,000 $2,000 $3,600 $2,700 $2,100 $2,100 $1,600 C. IRR. Calculate the IRR for this project. The company’s required rate of return is 10%. Should it be accepted or rejected? D. NPV. Using a 10% required rate of return, calculate the NPV for this project. Should it be accepted or rejected? E. PI. Calculate the Profitability Index (PI) for this project. Should it be accepted or rejected?
In dealing with IRR and NPV project evaluations, there is something called a crossover rate. Using the data below, graph and identify the crossover rate. What is this crossover rate and why is it important? Year Project Y Cash Flow Project Z Cssh Flow 0 ($36,000)= initial investment ($40,000)= initial investment 1 $10,000 $23,000 2 $10,000 $18,000 3 $10,000 $3,000 4 $10,000 $3,000 5 $10,000 $3,000