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Douglas? Keel, a financial analyst for Orange? Industries, wishes to estimate the rate of return for two? similar-risk investments, X and Y. ? Douglas's research indicates that the immediate past returns will serve as reasonable estimates of future returns. A year? earlier, investment X had a market value of ?$21,000?; and investment Y had a market value of ?$45,000. During the? year, investment X generated cash flow of ?$1,575 and investment Y generated cash flow of $ 5,993. The current market values of investments X and Y are ?$21,703 and ?$45,000?, respectively.

a. Calculate the expected rate of return on investments X and Y using the most recent? year's data.

b. Assuming that the two investments are equally? risky, which one should Douglas? recommend? ? Why?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92425188

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