1. A project has a 0.40 chance of doubling your investment in a year and a 0.60 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
2. Salvage Value. Your firm purchased machinery with a 7-year MACRS life for $10.30 million. The project, however, will end after 5 years. If the equipment can be sold for $4.80 million at the completion of the project, and your firm's tax rate is 30%, what is the after-tax cash flow from the sale of the machinery? Use the MACRS depreciation schedule. (Enter your answer in dollars, not in millions.)
After-tax cash flow