Week 1 - Assignment;Economics of Risk and Uncertainty Applied Problems;Please, complete the following two applied problems in a Word or Excel document. Show all your calculations and explain your results. Submit your assignment in the drop box by using the Assignment Submission button.;A generous university benefactor has agreed to donate a large amount of money for student scholarships. The money can be provided in one lump sum of $12 million in Year 0 (the current year), or in parts, in which $7 million can be provided at the end of Year 1, and another $7 million can be provided at the end of Year 2.;Describe your answer for each item below in complete sentences, whenever it is necessary. Show all of your calculations and processes for the following points;Assuming the opportunity interest rate is 8%, what is the present value of the second alternative mentioned above? Which of the two alternatives should be chosen and why?;How would your decision change if the opportunity interest rate is 12%?;Provide a description of a scenario where this kind of decision between two types of payment streams applies in the ?real-world? business setting.;Problem 2;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.
Paper#80844 | Written in 18-Jul-2015Price : $27