Marina is selecting projects based on the coefficient of variation Evaluate Site A and B to make the appropriate investment decision Site A Site B Probability Cash Flows Probability Cash Flows 0.3 80 0.2 50 0.3 130 0.2 80 0.1 160 0.3 130 0.3 170 180 0.2 235 Variance 60 Variance 60 0.1 The expected return of Site A is Choose... The expected return of Site B.is Choose... The coefficient of variation for site A is Choose... The coefficient of variation for site B is Choose... As per the Value of the Coefficient of Variation the site A is accepted or rejected Choose... As per the value of the Coefficient of Variation the site B is accepted or rejected Choose... Incorporating risk into the capital budgeting decision Sinalco Industries is evaluating a $70,000 project with the following cash flows Year Cash Flows 1 $11,000 2 16,000 3 4 21,000 24,000 5 30,000 Note that the coefficient of variation for the project is 0.847 Based on the following table of risk-adjusted discount rates, should the project be undertaken? Select the appropriate discount rate and then compute the net present value. Coefficient of Variation Discount Rate 0.25 696 26.50 896 51 -175 10% 1761.00 1296 1.01 - 1625 149696 The appropriate discount rate is Choose... The present value of the expected cashflows- Choose... The NPV of the Project Choose... The project is accepted or rejected? Choose. You are given a budget of only $80,000 to invest in projects. Which projects will you select, using the IRR method? Cost of Capital is 12% Project IRR Project Size A 18.00% 10.000 B 17.50% 25,000 C 14.0096 15,000 D 19.00% 25,000 E 10.00% 30.000 F 16.50% 25.000 G 21.0096 20.000 H 11.00% 15,000 Choose Choose... Choose When you rank the project as per IRR the first project is When you rank the project as per IRR the second project is The last project in the rankis If you have an open budget, how many projects do you accept? With an 80,000 budget, how many projects do you accept? The last project is rejected because its IRR is less than the cost of capital (True False) If the third and fourth projects are mutually exclusive, both of them are accepted (True. False) Choose Choose Choose Choose Given the following stocks A, B, and C. B C Stock Expected return 0.12 0.14 0.12 Beta 0.8 1.1 0.7 If the expected market rate of return is 0.095 and the risk-free rate is 0.03, which security would be considered the better buy and why? The risk premium = Choose... The CAPM return for A is Choose.. The CAPM return for B is Choose. The CAPM return for Cis Choose... The expected excess return for the Stock A Choose... The expected excess return for the Stock B Choose... The expected excess return for the Stock C Choose... Which project is the best investment (A, B, C) Choose