Share
Explore BrainMass

Rate of Return Probability Question

Assessing return and risk Tento Manufacturing must choose between two asset purchases. The annual rate of return and the related probabilities are given in the following table. Summarize the firm's analysis to this point.

Project 257 Project 432
Rate of return Probability Rate of return Probability
(-10%) 0.01 10% 0.05
10 0.04 15 0.10
20 0.05 20 0.10
30 0.10 25 0.15
40 0.15 30 0.20
45 0.30 35 0.15
50 0.15 40 0.10
60 0.10 45 0.10
70 0.05 50 0.05
80 0.04
100 0.01

a. For each project, compute:
(1) The range of possible rates of return.
(2) The expected value of return.
(3) The standard deviation of the returns.
(4) The coefficient of variation of the returns.
b. Construct a bar chart of each distribution of rates of return.
c. Which project would you consider less risky? Why?

Solution Preview

Please look at the attached documents for a detailed step-by-step solution.

(a) The summary is as:
Project 257 Project ...

Solution Summary

The solution gives detailed steps on solving a case study including computing range, mean, standard deviation and coefficient of variation, building bar charts, and an analysis of the results.

$2.19