August 2011
Beginner
547 pages
16h 12m
English
Content preview from Fundamentals of Financial Management, Third EditionBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
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SOLVED NUMERICAL PROBLEMS
- A company is expecting the following scenario of returns the next year. Find out the expected return.
Possible return % Likelihood Probability % 14Normally likely
308Most likely
503Meagrely likely
18−2Least likely
2Solution
Expected return = (0.14 × .30) + (0.08 ×.50) + (0.03 × 0.18) + (−0.02 × 0.02)
= 0.042 + 0.040 + 0.0054 + -0.0004 = 0.087 = 8.7%
- A company has the possible outcomes of cash flow given below:
Probability % Cash flow Rs 402,00,000305,00,000303,00,000Find the expected return and the variation in terms of standard deviation.
Solution
Expected return = (0.40 × 2,00,000) + (0.30 × 5,00,000) + (0.30 × 3,00,000) ...
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