Corporate Finance
Autor: 欣俞 何 • March 12, 2016 • Coursework • 325 Words (2 Pages) • 1,237 Views
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Question 4
The management of Gawain plc is evaluating two projects whose returns depend on the future state of the economy as shown below:
[pic 1]
The project (or projects) accepted would double the size of Gawain.
Required
- Explain how a portfolio should be constructed to produce an expected return of 20 per cent.
IRRᴀ (%) | Profitability | Weighted Outcome (%) | Deviation | Standard Deviation | Variance |
27 | 0.3 | 8.1 | 10.2 | 104.04 | 31.212 |
18 | 0.4 | 7.2 | 1.2 | 1.44 | 0.576 |
5 | 0.3 | 1.5 | -11.8 | 139.24 | 41.772 |
[pic 2] | [pic 3] [pic 4] |
IRRᴃ (%) | Profitability | Weighted Outcome (%) | Deviation | Standard Deviation | Variance |
35 | 0.3 | 10.5 | 12.5 | 156.25 | 46.875 |
15 | 0.4 | 6.0 | -7.5 | 56.25 | 22.5 |
20 | 0.3 | 6.0 | -2.5 | 6.25 | 1.875 |
[pic 5] | [pic 6] [pic 7] |
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