Question
In: Finance
34) The Oklahoma Pipeline Company projects the following pattern of inflows from an investment. The inflows...
34)
The Oklahoma Pipeline Company projects the following pattern of
inflows from an investment. The inflows are spread over time to
reflect delayed benefits. Each year is independent of the
others.
| Year 1 | Year 5 | Year 10 | |||||||||||||||||
| Cash Inflow | Probability | Cash Inflow | Probability | Cash Inflow | Probability | ||||||||||||||
| $ | 65 | 0.40 | $ | 50 | 0.35 | $ | 40 | 0.30 | |||||||||||
| 80 | 0.20 | 80 | 0.30 | 80 | 0.40 | ||||||||||||||
| 95 | 0.40 | 110 | 0.35 | 120 | 0.30 | ||||||||||||||
The expected value for all three years is $80.
Compute the standard deviation for each of the three years.
(Do not round intermediate calculations. Round your answer
to 2 decimal places.)
Solutions
Expert Solution
Solution :
Standard Deviation for Year 1 = 13.4164 %
= 13.42 % ( when rounded off to two decimal places )
Standard Deviation for Year 5 = 25.0998 %
= 25.10 % ( when rounded off to two decimal places )
Standard Deviation for Year 10 = 30.9839 %
= 30.98 % ( when rounded off to two decimal places )
Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.
jeff jeffy answered 6 months agoRelated Solutions
The Oklahoma Pipeline Company projects the following pattern of inflows from an investment. The inflows are...
The Oklahoma Pipeline Company projects the following pattern of
inflows from an investment. The inflows are spread over time to
reflect delayed benefits. Each year is independent of the
others.
Year 1
Year 5
Year 10
Cash Inflow
Probability
Cash Inflow
Probability
Cash Inflow
Probability
$
35
0.40
$
20
0.35
$
10
0.40
60
0.20
60
0.30
60
0.40
85
0.40
100
0.35
110
0.20
The expected value for all three years is $60.
Compute the standard deviation...
The Oklahoma Pipeline Company projects the following pattern of inflows from an investment. The inflows are...
The Oklahoma Pipeline Company projects the following pattern of
inflows from an investment. The inflows are spread over time to
reflect delayed benefits. Each year is independent of the
others.
Year 1
Year 5
Year 10
Cash Inflow
Probability
Cash Inflow
Probability
Cash Inflow
Probability
$
55
0.40
$
40
0.35
$
30
0.30
80
0.20
80
0.30
80
0.40
105
0.40
120
0.35
130
0.30
The expected value for all three years is $80.
Compute the standard deviation...
The Oklahoma Pipeline Company projects the following pattern of inflows from an investment. The inflows are...
The Oklahoma Pipeline Company projects the following pattern of
inflows from an investment. The inflows are spread over time to
reflect delayed benefits. Each year is independent of the
others.
Year 1
Year 5
Year 10
Cash Inflow
Probability
Cash Inflow
Probability
Cash Inflow
Probability
$
50
0.40
$
30
0.35
$
20
0.30
70
0.20
70
0.30
70
0.40
90
0.40
110
0.35
120
0.30
The expected value for all three years is $70.
Compute the standard deviation for...
The Oklahoma Pipeline Company projects the following pattern of inflows from an investment. The inflows are...
The Oklahoma Pipeline Company projects the following pattern of
inflows from an investment. The inflows are spread over time to
reflect delayed benefits. Each year is independent of the
others.
Year 1
Year 5
Year 10
Cash Inflow
Probability
Cash Inflow
Probability
Cash Inflow
Probability
$
65
0.20
$
50
0.25
$
40
0.30
80
0.60
80
0.50
80
0.40
95
0.20
110
0.25
120
0.30
The expected value for all three years is $80.
Compute the standard deviation...
The Oklahoma Pipeline Company projects the following pattern of inflows from an investment. The inflows are...
The Oklahoma Pipeline Company projects the following pattern of
inflows from an investment. The inflows are spread over time to
reflect delayed benefits. Each year is independent of the
others.
Year 1
Year 5
Year 10
Cash Inflow
Probability
Cash Inflow
Probability
Cash Inflow
Probability
$
85
0.40
$
60
0.35
$
50
0.30
110
0.20
110
0.30
110
0.40
135
0.40
160
0.35
170
0.30
The expected value for all three years is $110.
Compute the standard deviation...
The Oklahoma Pipeline Company projects the following pattern of inflows from an investment. The inflows are...
The Oklahoma Pipeline Company projects the following pattern of
inflows from an investment. The inflows are spread over time to
reflect delayed benefits. Each year is independent of the
others.
Year 1
Year 5
Year 10
Cash Inflow
Probability
Cash Inflow
Probability
Cash Inflow
Probability
$
90
0.40
$
80
0.35
$
70
0.30
100
0.20
100
0.30
100
0.40
110
0.40
120
0.35
130
0.30
The expected value for all three years is $100.
Compute the standard deviation...
The Oklahoma Pipeline Company projects the following pattern of inflows from an investment. The inflows are...
The Oklahoma Pipeline Company projects the following pattern of
inflows from an investment. The inflows are spread over time to
reflect delayed benefits. Each year is independent of the
others.
Year 1
Year 5
Year 10
Cash Inflow
Probability
Cash Inflow
Probability
Cash Inflow
Probability
$
105
0.40
$
95
0.20
$
90
0.40
120
0.20
120
0.20
120
0.40
135
0.40
145
0.60
150
0.20
The expected value for all three years is $120.
Compute the standard deviation...
consider the following three projects. All three have an initial investment of $300,000 Net Cash Inflows...
consider the following three projects. All three have an initial
investment of $300,000
Net Cash Inflows
Project L
Project M
Project N
Year
Annual
Accumulated
Annual
Accumulated
Annual
Accumulated
1
$75,000
$75,000
$25,000
$25,000
$150,000
$150,000
2
75,000
150,000
75,000
100,000
150,000
300,000
3
75,000
225,000
200,000
300,000
4
75,000
300,000
250,000
550,000
5
75,000
375,000
350,000
900,000
6
75,000
450,000
7
75,000
525,000
8
75,000
600,000
Required
1.
Determine the payback period of each project. Rank the projects
from...
The table shows the investment projected net cash inflows of the two projects over the coming...
The table shows the investment projected net cash inflows of the
two projects over the coming 5 years.
Year
Project A
Project B
1
$200000
$120000
2
$200000
$130000
3
$200000
$150000
4
$200000
$200000
5
$200000
$240000
Initial investment of $500000 and discount rate at 18% per year
under each project.
Discount factors for Year 1 to Year 5 as follows:
Year 1
0.8475
Year 2
0.7182
Year 3
0.6086
Year 4
0.5158
Year 5
0.4370
Find the payback...
A company estimates the following net cash inflows and outflows for a capital investment project that...
A company estimates the following net cash inflows and
outflows for a capital investment
project that is currently under consideration.
year Cash flow
0 (575,000)
1 45,800
2 99,000
3 104,300
4 118,700
5 130,400
6 129,000
7 116,500
8 77,200
9 55,000
10 12,500
Calculate the ARR and NPV of the project.
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