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You are considering investing in a green energy firm that is developing a promising, but risky, new technology. If the firm's R&D is successful, then
You are considering investing in a green energy firm that is developing a promising, but risky, new technology. If the firm's R&D is successful, then the firm will be a market leader in the clean-energy space. However, there is also a chance that the firm's R&D may turn out to be a complete failure, meaning that the firm will have to declare bankruptcy. The firm's stock price is currently only $5 per share, and you have the following expectations regarding the firm's end-of- year stock price: State of the Firm's R&D Probability End-of-Year Stock Price Technological breakthrough 0.01 $50 Modest progress 0.90 $6 Complete failure 0.09 $0 In the case of a technological breakthrough, the firm's management have also stated that they will pay shareholders a dividend of $5 per share. Calculate the expected return (E) and standard deviation (SD) associated with an investment in this firm over the next 12 months
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