Ashford Bus 640 Wk 1 Assignment
Question # 00003476
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Updated on: 11/12/2013 08:00 PM Due on: 11/12/2013
Problem 2:
The San Diego LLC is considering a threeyear 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 riskfree 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 threeyear 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 riskaversion 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?

Rating:
5/