You are an entrepreneur that has several business investments in real estate, restaurants, and retail stores. You are looking for your next investment opportunity for you and your private equity investment company. You have found two possible alternatives to invest in that will payoff in the next 10 years. Here are the descriptions of the two options.
Option A: Real estate development. This is a risky opportunity with the possibility of a high payoff, but also with no payoff at all. You have reviewed all of the possible data for the outcomes in the next 10 years and these are your estimates of the Net Present Value of the cash flow and probabilities.
High NPV: $5 million, Pr = 0.5
Medium NPV: $2 million, Pr = 0.3
Low NPV: $0, Pr = 0.2
Option B: Retail franchise for Just Hats, a boutique type store selling fashion hats for men and women. This also is a risky opportunity but less so than option A. It has the potential for less risk of failure, but also a lower payoff. You have reviewed all of the possible data for the outcomes in the next 10 years and these are your estimates of the Net Present Value of the cash flow and probabilities.
High NPV: $3 million, Pr = 0.75
Medium NPV: $2 million, Pr = 0.15
Low NPV: $1 million, Pr = 0.1
Assignment
Discuss an analysis of these two investments. Use expected value to determine which of these you should choose. Do your analysis in Excel.
Discuss a report to your private investment company and explain your analysis and your recommendation. Provide a rationale for your decision.
For a custom paper on the above topic or any other topic, place your order now!
What Awaits you:
On-time delivery guarantee
Masters and PhD-level writers
Automatic plagiarism check
100% Privacy and Confidentiality
High Quality custom-written papers
You May Also Like This:
- Risk: Frequency Distribution, Probabilities, and Expected Value SLP
- Determining the Posterior probabilities of Favorable and Unfavorable Markets for the Real Estate business
- BUS520-TD2-4-Business Analytics and Decision Making
- Risk: Frequency Distribution, Probabilities, and Expected Value Case
- Investment Options
- saving towards the purchase of a new car in 5 years
- investments recommendation
- packaging Vanda-Laye’s products.
- types of potential borrowers
- Suppose you enter into a long 6-month forward position at a forward price of $60. What is the payoff in 6 months for prices of $50, $55, $60, $65, and $70?
- Aurora Textile Company
- case report
- Project Planning, Control and Risk
- Management of TNA
- Under Armour, Inc. (UA) is a sportswear company engaged in the development, marketing and distribution of branded performance apparel, footwear and accessories for consumers
- Game Theory
- Frequency Distributions
- Adult Daycare Facility branding, pricing, and distribution strategy
- Draft a report to the Finance Director of Madison plc
- Social Media As Credible Marketing & Distribution tool in hospitality industry
- Airvalue Airways Strategic Planning
- Financial analysis of Madison PLC
- Approaching EEC about a possible purchase of the supplier
- report to the Finance Director of Madison
- Finance case study
- Report to the Finance Director of Madison plc
- alculating Present Values Imprudential, Inc., has an unfunded pension liability of $750 million that must be paid in 20 years
- what would happen to a company’s value chain if all electronic devices and systems suddenly were unavailable and an expected time for resolution time is unknown
- Branding in the Digital Age and Online Distribution
- orld’s resources to achieve sustainability and equitable distribution at the personal, professional, and global level.