Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. please answer all questions for a thumbs up!

please answer all questions for a thumbs up! ...

60.1K

Verified Solution

Question

Finance

please answer all questions for a thumbs up! image
image
Assumptions 1. The decision to invest in the Mark II must be made after three years, in 1985. 2. The Mark II has an investment requirement of $920 million, which is taken as f ixed. 3. Forecasted cash inflows of the Mark II have a present value in 1985 of $827 million and $479 million (827/1.23=479) in 1982 . 4. The future value of the Mark II cash flows is highly uncertain. This value evolves as a stock price does with a standard deviation of 398 per year. 5. The annual interest rate is 88 . How does the value of the option to invest in the Mark II in 1982 change if: How does the value of the option to invest in the Mark \| in 1982 change if: a. The investment required for the Mark II is $820 million (vs. $920 million)? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. The present value of the Mark II in 1982 is $520 million (vs. $479 million)? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. The standard devlation of the Mark II's present value is only 24% (vs. 39\%)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students