V The Blue Ocean Company must choose between two asset purchases. The annual rate of return and related probabilities given below summarize the firm's analysis. (20 Mark) Asset A Asset B Rate of Return Probability Rate of Return Probability 5% 40% 10% 15% 20% 30% 40% 30% 15% 25% 20% 40% For each asset, compute: a. The expected rate of return b. The standard deviation of the expected return c. The coefficient of variation of the return d. Which asset should the Blue Ocean Company select?! VII. KORONA Manufacturing is considering investing in either of two mutually exclusive projects, A and B. The firm has a 14 percent cost of capital, and the risk-free rate is currently 9 percent. The initial investment, expected cash inflows, and certainty equivalent factors associated with each of the projects are shown in the following table. Initial investment (II) Project B S 56,000 Year (1) Project A $ 40,000 Certainty Cash inflows equivalent factors (CF) (a) $20,000 0.90 16,000 0.80 12,000 0.60 10,000 0.50 10,000 0.40 Cash inflows (CF) $20,000 25,000 15,000 20.000 10,000 Certainty equivalent factors (0) 0.95 0.90 0.85 0.80 0.80 a) Find the net present value (unadjusted for risk) for each project. b) Find the certainty equivalent net present value for each project c) Compare and discuss your findings in a) and b) above. Which, if either, of the projects do you recommend that the firm accept? Explain. (marks 20)