Explore BrainMass
Share

Explore BrainMass

    Toby Amberville's Manhattan Café, Inc

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Hello, I have been struggling with a problem that deals with the selection of investment projects. Any help with this matter would be greatly appreciated. Thanks you!

    Please see the attached word doc. for details.

    © BrainMass Inc. brainmass.com October 10, 2019, 3:11 am ad1c9bdddf
    https://brainmass.com/economics/risk-analysis/toby-ambervilles-manhattan-cafe-inc-410449

    Attachments

    Solution Preview

    Please find the file attached.

    Thanks

    The response addresses the queries posted in 745 words.

    //This paper discuss regarding capital budgeting techniques for evaluation and analysis of investment proposals. Capital budgeting provides several tools and techniques to evaluate and assess risk involved in a project. The risk of a project can be denoted in terms of standard deviation, variation, and coefficient of variation. This paper also describes about use of profitability index and internal rate of return for making investment decision in a project.//
    a. Expected cash flow is calculated by multiply a probability to a cash flow.
    Expected cash flow of Project A
    For year 1
    E (CF) = $0 (0.18) + $50000(0.64) + $100000(0.18)
    = $50000
    For year 2
    E (CF) = $0 (0.08) + $50000 (0.84) + $100000 (0.08)
    = $50000
    Standard deviation for Project A
    For year 1
    σ y1 = √ ($0 - $50000)^2*(0.18)+ ($50000 - $50000)^2(0.64) + ($100000 - $50000)^2(0.18)
    = $30000
    For year 2
    σ y2 = √ ($0 - $50000)^2*(0.0.08)+ ($50000 - $50000)^2(0.84) + ($100000 - $50000)^2(0.08)
    = $20000
    Coefficient of variation = V = σ / ...

    Solution Summary

    The selection investment projects are determined. The response addresses the queries posted in 745 Words, APA References.

    $2.19