You are considering investing in a glove manufacturing plant for which you need to immediately pay RM10 million. You expect to produce and sell 10,000 gloves per year. Production commences after 12 months, i.e, at the end of year 1 (which is also the begining of Year 2). You expect production cost to be RM50 per glove. Selling price is estimated at RM100 per glove for the first three years of sales. You are not sure about the sales price after Year 3 because your exclusive patent right expired then. The plant facilities last for 8 years. Cost of capital is 8%.

** Compute the glove’s sales price after Year 3. and this project’s NPV**

**Don’t you think the price after year 3 is the same as the marginal cost, since at optimum level of output, marginal revenue=marginal cost?**

use excel

3.

You are considering investing in a startup company called Minions Technologies. After careful analysis, you determine that Minions will be able to generate $100,000 in cash flow at the end of each year for the first 5 years. Then, Minions will generate cash flow of $400,000 at the end of the 6th year, after which it will grow at 11% per year forever. Using a discount rate of 18%, what is the amount you would be willing to invest?

You are considering investing $1000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 2.5% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 35% and 65%, respectively. X has an expected rate of return of 21%, and Y has an expected rate of return of 9%. The dollar values of your position in Y would be _________, if you decide to hold a complete portfolio that has an expected return of 11%. Note

You are considering investing $1000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 2.5% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 35% and 65%, respectively. X has an expected rate of return of 21%, and Y has an expected rate of return of 9%. The dollar values of your position in X would be _________, if you decide to hold a complete portfolio that has an expected return of 11%.

You are considering investing $1000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 2.5% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 35% and 65%, respectively. X has an expected rate of return of 21%, and Y has an expected rate of return of 9%. The dollar values of your position in the Tbill would be _________, if you decide to hold a complete portfolio that has an expected return of 11%.

You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, *P*, constructed with two risky securities, *X* and *Y*. The weights of *X* and *Y* in *P* are 0.60 and 0.40, respectively. *X* has an expected rate of return of 0.14 and variance of 0.01, and *Y* has an expected rate of return of 0.10 and a variance of 0.0081.

What would be the dollar values of your positions in *X* and *Y*, respectively, if you decide to hold 40% of your money in the risky portfolio and 60% in T-bills?

A. $100; $240

B. $360; $240

C. $240; $160

D. Cannot be determined.

E. $240; $360

You are considering investing $1,100 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 4% and a risky portfolio, *P*, constructed with two risky securities, X and Y. The optimal weights of X and Y in *P* are 60% and 40% respectively. X has an expected rate of return of 15%, and Y has an expected rate of return of 10%. To form a complete portfolio with an expected rate of return of 7%, you should invest approximately __________ in the risky portfolio. This will mean you will also invest approximately __________ and __________ of your complete portfolio in security X and Y, respectively.

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