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2 answers:
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From the question we are told that:
Year 1= \$110
Year 2 = \$121
Risk free rate is
Risk premium
a)
Generally, the equation for Equity Return is mathematically given by
Therefore Present Value (PV) is
b)
Generally, the equation for certainty-equivalent cash flow is mathematically given by
Therefore
For Certainty-equivalent cash flow Year One
For Certainty-equivalent cash flow Year Two
c)
The Ratio of the certainty-equivalent cash flows to the expected cash flows in years 1 and 2 could be written as
or
Given:
Volume of cubical tank = cubic meters.
To find:
The length of a side of the water tank.
Solution:
The volume of a cubical tank is:
Where, a is the side length.
It is given that the volume of cubical tank is cubic meters. So,
Taking cube root on both sides, we get
Therefore, the length of a side of the water tank is 2 meters.