Question;Problem 2;The San Diego LLC is considering a three-year project, Project A;involving an initial investment of $80 million and the following cash;inflows and probabilities;Describe your answer for each question in complete sentences;whenever it is necessary. Show all of your calculations and processes;for the following points;Describe and calculate Project A?s expected net present value;(ENPV) and standard deviation (SD), assuming the discount rate (or;risk-free interest rate) to be 8%. What is the decision rule in terms of;ENPV? What will be San Diego LLC?s decision regarding this project?;Describe your answer.The company is also considering another three-year project;Project B, which has an ENPV of $32 million and standard deviation of;$10.5 million. Project A and B are mutually exclusive. Which of the two;projects would you prefer if you do not consider the risk factor?;Explain.Describe the coefficient of variation (CV) and the standard;deviation (SD) in connection with risk attitudes and decision making. If;you now also consider your risk-aversion attitude, as the CEO of the;San Diego LLC will you make a different decision between Project A and;Project B? Why or why not?
Paper#51312 | Written in 18-Jul-2015Price : $37