TAN Co. is assessing two options: Project A and Project B. What is the range for Project A (state as a decimal)? Scenario Analysis Boom Most likely Recession Probability 30% 50% 20% A B 0.15 0.12 0.08 0.08 0.00 0.03 Avg. return Range TAN Co. is assessing two options: Project A and Project B. What is the range for Project B (state as a decimal)? Scenario Analysis Probability A B Boom 30% 0.15 0.12 Most likely 50% 0.08 0.08 Recession 20% 0.00 0.03 Avg. return Range

2. There are two projects, X and Y. the following probability distribution for the projects are given below PROJECT X PROJECT Y Return Prob. Return Prob. Pessimistic 8% 0.25 7% 0.35 Most Likely 16 0.50 13 0.45 Optimistic 21 0.25 22 0.20 Which project should you take based on Risk and Return?why?

Mike Riskless is considering two projects. He has estimated the IRR for each under three possible scenarios and assigned probabilities of occurrence to each scenario.   State of Economy Probability Estimated BTIRR Investment I Estimated BTIRR Investment II Optimistic 0.20 0.15 0.20 Most likely 0.60 0.10 0.15 Pessimistic 0.20 0.05 0.05   1.00       Riskless is aware that the pattern of returns for Investment II looks very attractive relative to Investment I; however, he believes that Investment II could be more risky than Investment I. He would like to compare the two investments considering both the risk and return on each.   Required: a. Compute BTIRR under each of the three possible scenarios. b. Compute variance and standard deviation of the IRRs.

b) Using data provided below, compute appropriate values and fill the table below to help identify the least risky and most risky project among alternatives A, B and C using appropriate criteria. Project EV D D2 Var St. dev Coef.0f Var TT 12 0.2 A 18 0.7 28 0.1 10 0.3 В 22 0.6 32 0.1 11 0.1 C 21 0.8 31 0.1 Where n denotes the profit, P is the probability, EV stand for Expected value, D is the Deviation, D$ denote the deviation square, St. dev is the standard deviation and finally Coef.of Var is the coefficient of variation.

A2. (PaybackandNPV)Threeprojectshavethecashflowsgivenhere.Thecostofcapitalis10%. a. Calculate the paybacks for all three projects. Rank the projects from best to worst based on their paybacks. Calculate the NPVs for all three projects. Rank the projects from best to worst based on their NPVs c. Why are these two sets of rankings different? YEAR              0   1   2   3   4     5Project 1     −10  4   3   2   1     5 Project 2      −10 1   2   3    4    5 Project 3      −10 4   3   2    1   10

You are considering Project A, with the following information (Assume all statistics given are correct):                         Economy         Probability of                                Rates of Return      ____                        Condition      State Occurring         Project A            Market              T-Bill                        Bad                            0.2                       3.0%                 0.0%                4.82%                        Average                     0.4                      10.0%                8.0%                4.82%                        Good                         0.4                      15.0%              12.0%                4.82%                           Expected return                                  10.6%                 8.0%                4.82%                        Standard deviation                              5.72%              4.38%                  0%                        Correlation Coefficient between…

Suppose the net present values ​​of projects A and B show a distribution as follows. Net Present Value (TL) 750 1000 1250 1500 1750 Project A  0.1 0.15 0.2 0.25 0.3 Project B  0.15 0.25 0.3 0.1 0.2 a) Compare the projects according to the expected value criteria? b) Compare the projects by standard deviation criteria? c) Evaluate A and B projects according to the coefficient of variation criteria?

Whispering Winds Company is considering a long-term investment project called ZIP. ZIP will require an investment of $130,000. It will have a useful life of four years and no salvage value. Annual cash inflows would increase by $81,000, and annual cash outflows would increase by $40,500. In addition, the company's required rate of return is 10% Click here to view the factor table (a) Calculate the net present value on this project. (If the answer is negative, use either a negative sign preceding the number eg-5,275 or parentheses es. (5,275), For calculation purposes, use 5 decimal places as displayed in the factor table provided, eg. 1.25124 and final answer to O decimal places, eg. 5,275) Net present value $ Identify whether the project should be accepted or rejected. The project should be (b) Q Search 458 PM

Assume you are risk-averse and have the following three choices Expected Value $ 2,200 Standard Deviation $ 1,440 Project A B C 2,730 2,250 Project A B C 1,960 1,490 a. Compute the coefficient of variation for each. Note: Round your answers to 3 decimal places. Coefficient of Variation b. Which project will you select? O Project A O Project B O Project C

Consider the following figure. If firm A were to use the average or composite WACC it would Rate of Return 13.0 (5) 11.0 10.0 90 Project L 70 70 Division L's WACC О Riskov Division H's WACC WACC Project H Composite WACC Firm A Risk Riskov O accept Project L and reject Project H O be making the right decisions on acceptance or rejection of both projects O accept both Project L and Project H O reject both Project L and Project H O accept Project H and reject Project L