Additional Turn-in Problem 2 (Scenario Analysis) GE is currently traded at $25 per share. The following is a scenario analysis for its future share price in one year Probability, p(s) Share price Dividends Scenario, s GDP23% 3%> GDP21% 1%> GDP>0% 0%> GDP>-1% 0.60 0.10 0.04 0.01 $30.00 $26.50 $19.50 $17.50 $12.50 $2.00 $1.00 $0.50 $0.00 $0.00 1%> GDP 1. The probability for the first scenario is missing, what is its value? 2. Compute the holding period return (HPR) for each scenario 3. Compute the expected return and volatility, and then the "reward-to-volatility" or Sharpe ratio for GE based on this scenario analysis. Assume that the T-bill rate is 1% Additional Turn-in Problem 3 (Expected Return and Realized Return) What is the difference between expected return and realized return? Which one is directly relevant for investment decision? What is the the risk premium?

Shrieves casting company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by sidney johnson, a recently graduated mba. the production line would be set up in unused space in the main plant. the machinery’s invoice price would be approximately $200,000, another $10,000 in shipping charges would be required, and it would cost an additional $30,000 to install the equipment. the machinery has an economic life of 4 years, and shrieves has obtained a special tax ruling that places the equipment in the macrs 3-year class. the machinery is expected to have a salvage value of $25,000 after 4 years of use. the new line would generate incremental sales of 1,250 units per year for 4 years at an incremental cost of $100 per unit in the first year, excluding depreciation. each unit can be sold for $200 in the first year. the sales price and cost are both expected to increase by 3% per year due to inflation. further, to handle the new line, the firm’s net working capital would have to increase by an amount equal to 12% of sales revenues. the firm’s tax rate is 40%, and its overall weighted average cost of capital, which is the risk-adjusted cost of capital for an average project (r), is 10%. define “incremental cash flow.” (1) should you subtract interest expense or dividends when calculating project cash flow?

Suppose a country's productivity last year was 84. if this country's productivity growth rate of 5 percent is to be maintained, this means that this year's productivity will have to be:

Which of the following statements is (are) true? i. free entry to a perfectly competitive industry results in the industry's firms earning zero economic profit in the long run, except for the most efficient producers, who may earn economic rent. ii. in a perfectly competitive market, long-run equilibrium is characterized by lmc < p < latc. iii. if a competitive industry is in long-run equilibrium, a decrease in demand causes firms to earn negative profit because the market price will fall below average total cost.