Give typing answer with explanation and conclusion Question 1 To compensate for differences in the time horizons among investment opportunities, investors use ________ return as their selection criterion. A) real B) expected C) rate D) average annual
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- Question 2 You must choose between two investments, X and Y . The profitability index (PI), net present value (NPV) and internal rate of return (IRR) of the two investments are as follows: Criteria Investment X Investment Y NPV R44 000 −R22 000 PI 1,945 0,071 IRR 16,00% 8,04% Which investment(s) should you choose, taking all the above criteria into consideration, if the cost of capital is equal to 12% per year? [1] X [2] Y [3] Both X and Y [4] Neither X nor Y [5] Too little information to make a decision 17 DSC1630The expected value of an investment: Answer a. Is what the owner will receive when the investment is sold b. Is the sum of the payoffs c. Is the probability-weighted sum of the possible outcomes d. Cannot be determined in advanceThe expected rate of return of an investment ________. a. equals one of the possible rates of return for that investment b. equals the required rate of return for the investment c. is the mean value of the probability distribution of possible returns d. is the median value of the probability distribution of possible returns e. is the mode value of the probability distribution of possible returns
- Which of the following decision criteria is the easiest to use and very popular among investors? O Payback period. O Internal rate of return. O Average accounting return. Net present value. O Discounted return on investment.When using present worth to evaluate the attractiveness of a single investment alternative, what value is the calculated PW compared to? a. 0.0b. MARR c. 1.0 d. WACC.According to Wald's criterion, which investment is decided by looking at the profitability of three investments such as S1, S2 and S3 in the following economic environments? Economic Conditions S1 S2 S3 Vivid Economic Situation 13 6 7 Normal Economic Condition 10 9 8 Stagnant Economic Condition 7 14 4 Recession Condition 8 7 15
- assume that an individual investor wants to select one market segment for a new investment. a forecast shows stable to declining economic conditions with the following probabilities: improving (0.2), stable (0.5), and declining (0.3). what is the preferred market segment for the investor, and what is the expected return percentage?1. If you perform a NPV analysis on a perspective investment using a "d" = 15% and: a. the NPV Is < 0, what can you tell me about the investment's IRR (time adjusted rate of return)? b. the NPV is > 0, what can you tell me about the investment's IRR (time adjusted rate of return)? c. the NPV is= 0, what can you tell me about the investment's IRR (time adjusted rate of return)? 2. We presume in Investment analysis that the payback method of evaluation is a better measure of.................than it is a measure of...................... We also think less of the payback method because it sometimes ignores the............., ..................of an investment since the................. the oftentimes occurs after the payback period has lapsed. 3. Please explain why we oftentimes equate EBITDA (earnings before subtracting] interest, taxes, depreciation & amortization) with NOI (net operating income) in examining business' profitability. Why don't…A realized return is the rate of return actually earned on an investment. Group of answer choices True False
- Time value of money question: Envision you are approached with an investment opportunity. You aregiven two alternatives to choose from. Investment A has a higher interest rate than Investment B.Investment A requires a greater number of periods until you receive the benefit than Investment B. Applying concepts from the PV = FV/(1+r)^n (the NPV formula and discounting) describe the process ofhow you would decide which investment option would be better to invest in. Discussing how changes inboth the interest rate and the number of periods would affect this decision will help.PLEASE ANSWER ALL THE QUESTIONS Question 1 Fill the parts in the above table that are shaded in yellow. You will notice that there are nine line items. Question 2 Using the data generated in the previous question (Question 1);a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what does it show? Identify undervalued/overvalued investments from the graph Question 3 From the information generated in the previous two questions; a) Identify two investment alternatives that can be combined in a portfolio. Assume a 50-50 investment allocation in each investment alternative. b) Compute the expected return of the portfolio thus formed. c) Compute the portfolio’s beta. Is the portfolio aggressive or defensive?3 9. The historical returns for two investments-A and B-are summarized in the following table for the period 2016 to 2020, Use the data to answer the questions that follow. a. On the basis of a review of the return data, which investment appears to be more risky? Why? b. Calculate the standard deviation for each investment's returns. c. On the basis of your calculations in part b, which investment is more risky? Compare this conclusion to your observation in part a. Review Only Click the icon to see the Worked Solution. a. On the basis of a review of the return data, which investment appears to be more risky? Why? (Choose the best answer below.) O A. The riskier investment appears to be investment B, with returns that vary widely from the average relative to investment A, whose returns show less deviation from the average. O B. Investment A and investment B have equal risk because the average returns are the same. O C. The riskier investment appears to be investment A, with returns…