Economics of Risk and Uncertainty Applied Problem Please complete the following two applied problems. Show all your calculations and explain your results. Problem 1: A generous university benefactor has agreed to donate a large amount of money for student scholarships. The money can be provided in one lump sum of $12 million in Year 0 (the current year), or in parts, in which $7 million can be provided at the end of Year 1, and another $7 million can be provided at the end of Year 2. Describe your answer for each item below in complete sentences, whenever it is necessary. Show all of your calculations and processes for the following points:Assuming the opportunity interest rate is 8%, what is the present value of the second alternative mentioned above? Which of the two alternatives should be chosen and why? How would your decision change if the opportunity interest rate is 12%? Provide a description of a scenario where this kind of decision between two types of payment streams applies in the real-world business setting. Problem 2: The San Diego LLC is considering a three-year project, Project A, involving an initial investment of $80 million and the following cash inflows and probabilities: [img title=”BUS640 Week 1, Problem 2 Chart” alt=”BUS640 Week 1, Problem 2 Chart” src=” 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 risk-free 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 three-year 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 risk-aversion 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?
You can get our ideal online homework help services with four easy steps. All you have to do is inform us of your requirements. Immediately we will match with a specialist in your academic discipline. After that, we will track your order, review it to ensure it meets your requirements, and submit it to your email.
Fill in your assignment instructions on the order form
Immediately you contact us for homework help; we will assign your assignment to an academic expert.
We have a team of editors, who will thoroughly review your assignment, ensuring there are no errors before submission
Once we have completed the assignment, we will deliver it to your account. Additionally, we will send a notification to your email.
Once you consult us for homework help online services, you will attest to why we are among the USA's best essay writing services.
Read on and find out some of the features that make our services superlative.
You can confirm that the content you get is original for free using our plagiarism checker.
We offer unlimited access to our essay homework samples.
Once you place an order, we format it accordingly without demanding additional charges.
We offer free unlimited revisions until your assignment is of your desired quality..
We have a team of specialized editors who review your assignment before submission.
You can track the progress of your homework for free.