# HW5.docx - Question 1 3 out of 3 points Use the following...

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Question 1 3 out of 3 points Use the following information for questions 1 to 3. Cumnock Corporation (CC) is estimating cash flows from a new product for the next year. The cash flow generated by the new product sales is uncertain. It has estimated the following probability distribution of after-tax cash flows from these sales for the next year: Possible State Probability After-tax Cash Flow 1 .2 \$9,000 2 .3 \$12,000 3 .5 \$15,000 Use the above information to answer the following questions. The tax rate is 35%. What is the expected value of the after-tax cash flows from the new design? Selected Answer: \$12,9 00 Question 2 3 out of 3 points What is the standard deviation of the after-tax cash flows? Selected Answer: 2,34 3 Question 3 3 out of 3 points What is the coefficient of variation of after-tax cash flows? Selected Answer: 0.1 8 Question 4 3 out of 3 points You are a manger of the Lowell Fund and manage a portfolio of \$21 million. Your portfolio has a beta of 1.2 and required return of 12 percent.

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• Fall '15
• Yash R. Puri
• Net Present Value, Probability theory, after-tax cash flows

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