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1) Meyer Electronics anticipates sales next year to be=$3,000,000 if economy is solutions strong, $1,200,000 if economy is steady, and $800,000 if economy is weak. Mr. Meyer thinks there is a 30% probability economy will be strong, a 60% probability of steady economy, and 10% probability of weak economy. Determine the expected level of sales for next year?

2) Hokie Corporation is allowing for two mutually exclusive projects. Both need an initial outlay of= $10,000 and will operate for five years. Project A will make expected cash flows of= $5,000 per year for years 1 through 5, while project B will make expected cash flows of= $6,000 per year for years one through five. Since project B is riskier of two projects, management of Hokie Corporation has determined to apply required rate of return of 15% to its evaluation but only 12% required rate of return to project A. Compute each project’s risk-adjusted net present value.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M915278

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