Problem to be solved : Dani Khalil , financial analyst for orange industry , wishes...
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Problem to be solved : Dani Khalil , financial analyst for orange industry , wishes to estimate the rate of return for two similar risk investment , X and Y . Danis research indicates that the immediate past return will serve as reasonable estimate of future returns. A year earlier , investment X had a market value $20,000; investment Y had a market value of $ 55,000 . During the year , investment X generated cash flow of $1500 and investment Y generate cash flow $6,800. The current market values of investment X and Y are $21,000 and $55,000, respectively.
Calculate the expected rate of return on investment X and Y using the most recent years data. Assuming that the two investment are equally risky, which one should Dani recommend and why?
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