An investor is looking at two projects, project A and B. Project A pays$44,000 with prob. 0.7 and $14,000 with prob. 0.3, while project B pays$32,000 with prob. 0.5 and $X with prob. 0.5. If the two projects have thesame expected value, what is X?O $35,000O $36,000O $37,000O $38,000

The objective of the question is to find the value of X, which is the payout of project B with a…

Answered: An investor is looking at two projects,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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You have a choice between these 2 mutually exclusive investments, Projects A and B. If you require a 15% return, which investment should you choose? Project A Project B Year Cash Flow Cash Flow -100,000 I.125,000 1 20,000 74,000 40,000 46,000 3 81,000 40,000 O Project A, because it has a smaller initial investment. Project B, because it has a higher NPV. O Either one, because they have the same profitability indexes. O Project A, because it has the higher NPV. O Project B, because it pays back faster. 2.
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An investor is looking at two projects, project A and B. Project A pays $44,000 with prob. 0.7 and $14,000 with prob. 0.3, while project B pays $32,000 with prob. 0.5 and $X with prob. 0.5. If the two projects have the same expected value, what is X? O $35,000 O $36,000 O $37,000 O $38,000