Project A’s data is below:
If there is: Expected return Probability of occurrence
Strong demand 20% .20
Normal demand 12% .60
Weak demand 3% .20
a. What is the expected return for the project?
b. If the required rate of return is 13%, should they proceed with the project? Why?
c. You are analyzing Project B against Project A. Project B has a range of 19, which is considered more risky A or B?
d. Does this mean Project B is automatically eliminated from consideration?