Question
In: Statistics and Probability
Table 1 below reports the present values (in £ million) of different investment projects at different...
Table 1 below reports the present values (in £ million) of different investment projects at different interest rates in the future.
Table 1. Project NPVs.
| Future interest rate | |||||||
| Project | 3.0% | 3.5% | 4.0% | 4.5% | 5.0% | 5.5% | 6.0% |
| A | 76.21 | 72.26 | 68.61 | 65.23 | 62.09 | 59.18 | 56.48 |
| B | 78.81 | 74.2 | 69.98 | 66.12 | 62.57 | 59.31 | 56.31 |
| C | 80.36 | 75.41 | 70.9 | 66.78 | 63.03 | 59.59 | 56.44 |
| D | 78.81 | 74.33 | 70.22 | 66.44 | 62.97 | 59.76 | 56.81 |
| E | 84.24 | 77.18 | 71.01 | 65.58 | 60.79 | 56.55 | 52.78 |
| probability | 0.1 | 0.15 | 0.2 | 0.2 | 0.15 | 0.1 | 0.1 |
Calculate the expected present value of each project. Which project maximises the expected value? Would you choose to proceed with this one?
Calculate the maximin and the maximax criteria.
Calculate the minimax regret criterion. When would this criterion be applied?
Calculate the expected value of perfect information. What does it describe?
Solutions
orchestra answered 2 years agoRelated Solutions
. Table 1 below reports the present values (in £ million) of different investment projects at...
. Table 1 below reports the present values (in £ million) of
different investment projects at different interest rates in the
future.
Table 1. Project NPVs
Future interest
rate
Project
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
A
76.21
72.26
68.61
65.23
62.09
59.18
56.48
B
78.81
74.2
69.98
66.12
62.57
59.31
56.31
C
80.36
75.41
70.9
66.78
63.03
59.59
56.44
D
78.81
74.33
70.22
66.44
62.97
59.76
56.81
E
84.24
77.18
71.01
65.58
60.79
56.55
52.78
probability
0.1
0.15...
Table 1 below reports the present values (in £ million) of different investment projects at different...
Table 1 below reports the present values (in £ million) of
different investment projects at different interest rates in the
future.
Future interest rate
Project
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
A
76.21
72.26
68.61
65.23
62.09
59.18
56.48
B
78.81
74.2
69.98
66.12
62.57
59.31
56.31
C
80.36
75.41
70.9
66.78
63.03
59.59
56.44
D
78.81
74.33
70.22
66.44
62.97
59.76
56.81
E
84.24
77.18
71.01
65.58
60.79
56.55
52.78
probability
0.1
0.15
0.2
0.2
0.15
0.1
0.1...
Table 1 below reports the present values (in £ million) of different investment projects at different...
Table 1 below reports the present values (in £ million) of
different investment projects at different interest rates in the
future.
Future interest rate
Project
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
A
76.21
72.26
68.61
65.23
62.09
59.18
56.48
B
78.81
74.2
69.98
66.12
62.57
59.31
56.31
C
80.36
75.41
70.9
66.78
63.03
59.59
56.44
D
78.81
74.33
70.22
66.44
62.97
59.76
56.81
E
84.24
77.18
71.01
65.58
60.79
56.55
52.78
probability
0.1
0.15
0.2
0.2
0.15
0.1
0.1...
1. Consider the investment projects given in the table below. Net Cash Flow of Project Year...
1. Consider the
investment projects given in the table below.
Net Cash Flow of Project
Year
A
B
C
0
($1,500)
($5,000)
($2,200)
1
$700
$3,000
$1,600
2
$2,500
$4,500
$2,600
a. Compute the IRR for each
project.
b. On the basis of IRR
criteria, if all three projects are mutually exclusive
investments, which project
should be selected at 15% MARR?
c. Create a set of decision
statements for varying MARR from 0% to 60%.
(Do
not provide statements...
The table below reports the returns of assets A, B and C in four different states...
The table below reports the returns of assets A, B and C in four
different states of the world, each equally likely.
State of the
world
Return
A
Return
B
Return
C Probability
Boom
5%
0 5%
0.25
Growth
0
0
0
0.25
Downturn 0 5%
0 0.25
Recession
5% 5% 5% 0.25
a) Calculate the expected return and the variance for all assets
and determine the expected return of any portfolio obtained by
mixing any of the three assets.
b) Calculate the covariance of assets A...
Use Table PV-1 and Table PV-2 to determine the present values of the following cash flows.
Use Table PV-1 and Table PV-2 to determine the present values of the following cash flows. (For all requirements, round PV factor to 3 decimal places, Intermediate and final answer to the nearest dollar amount.) a. $15,000 to be paid annually for 10 years, discounted at an annual rate of 6 percent. Payments are to occur at the end of each year. b. $9,200 to be received today, assuming that the money will be invested in a two-year certificate of deposit earning 8 percent annually. c. $300...
5-38 Consider the two mutually exclusive projects in the table below. Salvage values represent the net...
5-38 Consider the two mutually exclusive projects in the table
below. Salvage values represent the net proceeds (after tax) from
disposal of the assets if they are sold at the end of each year.
Both projects B1 and B2 will be available (or can be repeated)
with the same costs and salvage values for an indefinite
period.
B1
B2
n
Cash Flow
Salvage Value
Cash Flow
Salvage Value
0
−$15,000
—
−$30,000
—
1
−2,500
7,500
−2,700
6,500
2
−2,500...
A company is considering 5 proposals for investment. The table below displays each proposal's net present...
A company is considering 5 proposals for investment. The table
below displays each proposal's net present value (NPV) in millions
of dollars and each proposal's requirements for cash (in millions
of dollars) for each of the next three years.
Cash Requirements
Proposal
NPV
Year
1 Year
2
Year 3
1
12.8
4.40
3.30
3.50
2
10.5
4.30
2.50
2.10
3
9.4
4.10
3.40
1.50
4
11.7
4.70
3.90
3.10
...
The values of y and their corresponding values of y are shown in the table below...
The values of y and their corresponding values of y are shown in
the table below
x
2
3
4
4
6
y
2
3
5
4
6
A) Calculate the coefficient of correlation;
B) Calculate the coefficient of determination;
C) Obtain the regression coefficients and write the regression
expression;
D) Provide your prediction of the dependent variable if the
value of the independent variable is 4.
Use the table below to answer the following questions: Present Value of 1 Factor Present Value...
Use the table below to answer the following questions: Present
Value of 1 Factor Present Value of an Annuity of 1 Factor Period
1/2 Yr Full-Yr 1/2 Yr Full-Yr 1 0.9578 0.9174 0.9578 0.9174 2
0.9174 0.8417 1.8753 1.7591 3 0.8787 0.7722 2.7540 2.5313 4 0.8417
0.7084 3.5957 3.2397 5 0.8062 0.6499 4.4019 3.8897 6 0.7722 0.5963
5.1740 4.4859 Assumption: Required annual effective rate (EPR) of
return is 9%. If an investment pays you $54,000 every 6 months for
3...
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