Financial Accounting Textbook Question 3 December 2020 today, Financial accounting analysis

Question #5 This question consists of 2 independent sub-questions 1 Consider a risky project x that has the following payoff and probability distribution table: Payoff $1 $4 $16 Probability 0.2 0.5 0.3 a. Compute the expected value, EV, of project x. b. Suppose an investor, Mr. John Nash, has a utility function given by the function 8 (x) = 2Vx Compute CE, the certainty equivalence, of x for our investor. Is Mr. Nash risk-neutral, risk-averse, or risk-loving? Explain C. Suppose another investor, Mrs. Donna Nash, has a utility function given by the function g (x) = 0.25*x2 Compute CE, the certainty equivalence, of x for our investor. Is Mrs. Nash risk-neutral, risk-averse, or risk-loving? Explain2. Consider a savings accounts model. At time t=0, you invest $10,000 in RBC bank. RBC provides 12% return in year 1, 12% return in year 2, and 15% return in year 3. At the end of year 1, you withdraw $660. At the end of year 2, you withdraw $1,210. Your discount rate is 10% per year. (a) Use FCF valuation model to calculate the NPV of your investment at time t=0 0)) Compute R1 (residual income) for each year for 3 years. RI = actual income required income