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Pappy's Potato: Calculating Project Cash Flows and NPV for your portfolio

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Calculating Project Cash Flows and NPV - See attached file.

If your portfolio is invested 30 percent each in A and B and 40 percent in C, what is the portfolio's expected return? The variance? The standard deviation?

b. If the expected T-bill rate is 4.25 percent, what is the expected risk premium on the portfolio?

c. If the expected inflation rate is 3 percent, what is the expected real return on the portfolio? What is the expected real risk premium on the portfolio?

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Solution Summary

The explanations in both Word and Excel are clear and concise with respect to the problem questions of risk and return.

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4. Calculating Project Cash Flows and NPV.

Pappy's Potato has come up with a new product, the Pet Potato (they are freeze-dried to last longer). Pappy's paid $120,000 for a marketing survey to determine the viability of the product. It is felt that Pet Potato will generate sales of $270,000 per year. The fixed costs associated with this will be $115,000 per year, and variable costs will amount to 30 percent of sales. The equipment necessary for ...

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