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Posted by:
Annie kavitha 
Price Quoted by Student: $8 
Posted On: 20110421 02:02:20 


Question
21. Two projects have the following NPVs and standard deviations:

Project A 
Project B 
NPV 
200 
300 
Standard deviation 
75 
100 
Which of the two projects is more risky?
22. Your firm has an opportunity to make an investment of $50,000. Its cost of capital is 12 percent. It expects after tax cash flows (including the tax shield from depreciation) for the next 5 years to be as follows:
Year 1 
$10,000 
Year 2 
20,000 
Year 3 
30,000 
Year 4 
20,000 
Year 5 
5,000 
a) Calculate the NPV
b) Calculate the IRR (to the nearest percent
c) Would you accept this project?
23. "All our projects are discounted at the same interest rate," says the treasurer of a large company. Would you dispute the advisability of such a procedure? 

Solutions 
Which of the two projects is more risky?
Standard 

Attachment 1: 21. Two projects have the following NPVs and standard deviations (2).doc

Solution Posted By: Annie kavitha Posted on:
21042011 




 
