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Your team is evaluating two mutually exclusive projects. The initial cost of each investment is $50,000. The probability of the cash flows is shown below.

Your team is evaluating two mutually exclusive projects. The initial cost of each investment is $50,000. The probability of the cash flows is shown below. If the project will have a 5 year life and the appropriate cost of capital is 9% calculate the following:

Probability

CF(A)

CF(B)

10%

(34,000)

(13,500)

25%

(8,500)

2,125

30%

17,000

19,000

25%

42,500

31,875

10%

68,000

46,750

Expected value

NPV

Standard deviation

IRR

MIRR

Use the information below for the next problem

Depreciation

34,000

EBIT

179,000

Investment in Operating Assets

69,000

Tax Rate

34%

Find the free cash flow

3. Calculate the free cash flow

Use the following information for the next problem

The Security Market Line

Security X

Market

Beta

0.76

1

Expected Return

?

12%

If the risk free rate is

2.80%

Find the expected return on security X

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