Homework Answers
Coefficient of variation = Standard deviation / Expected return
Coefficient of variation = 0.30 / 0.25
Coefficient of variation = 1.20
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2. Cheng Inc. is considering a capital budgeting project that has an expected return of 25%...
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Soho Inc. is considering an investment that has an expected return of 22.5% and a standard deviation of 8%. What is the investment's coefficient of variation?
Klott Company used scenario analysis to evaluate a capital budgeting project. The analysis generated a net...
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Yaris Fund has the following statistics: Expected return = 25% and Standard deviation = 30%. The...
Yaris Fund has the following statistics: Expected return = 25% and Standard deviation = 30%. The Market’s Expected return is 12% with a Standard Deviation of 22.5%. The Risk Free rate is 5%. What is Yaris Fund’s Coefficient of Variation? A). 1.200 B). 0.833 C). 0.533 D). 0.667 What is Yaris Fund’s Sharpe Ratio? A). 1.200 B). 0.833 C). 0.533 D). 0.667
1. A capital budgeting project is acceptable if the rate of return required for such a...
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Scenario Analysis Shao Industries is considering a proposed project for its capital budget. The company estimates...
Scenario Analysis Shao Industries is considering a proposed project for its capital budget. The company estimates the project's NPV is $12 million. This estimate assumes that the economy and market conditions will be average over the next few years. The company's CFO, however, forecasts there is only a 50% chance that the economy will be average. Recognizing this uncertainty, she has also performed the following scenario analysis: Economic Scenario Probability of Outcome NPV Recession 0.05 -$54 million Below average 0.20...
Purple Whale Foodstuffs Inc. is evaluating a proposed capital budgeting project (project Delta) that will require an in...
Purple Whale Foodstuffs Inc. is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,500,000 Purple Whale Foodstuffs Inc. has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Purple Whale Foodstuffs Inc.'s WACC is...
Shao Industries is considering a proposed project for its capital budget. The company estimates the project's...
Shao Industries is considering a proposed project for its capital budget. The company estimates the project's NPV is $12 million. This estimate assumes that the economy and market conditions will be average over the next few years. The company's CFO, however, forecasts there is only a 50% chance that the economy will be average. Recognizing this uncertainty, she has also performed the following scenario analysis: Economic Probability of NPV Scenario Outcome Recession 0.05 -$58 million Below average 0.2 -16 million ...
Capital Budgeting: Homework 1. Waste Management has a WACC of 12 percent and it is considering a project with a cost of...
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1. A capital budgeting project is acceptable if the rate of return required for such a project is greater than the project's internal rate of return. True False
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