Risk analysis Green Energy is considering expanding its investment in renewable energy generation. Two possible​ types, wind and​ solar, of energy generation are under review. After investigating the...

Risk analysis Green Energy is considering expanding its investment in renewable energy generation. Two possible​ types, wind and​ solar, of energy generation are under review. After investigating the possible​ outcomes, the company made the estimates shown in the following​ table:

                                 wind farm                   solar farm

initial investment      120 million                 120 million

annual rate of return

pessimistic                 4%                            -6%

most likely                 20%                            20%

optimistic                    36%                          46%

The pessimistic and optimistic outcomes occur with a probablity of​ 25%, and the most likely outcome occurs with a probability of​ 50%.

a.Determine the
range
of the rates of return for each of the two projects.

b.Which project is less​ risky?

c.If you were making the investment​ decision, which one would you​ choose? What does this imply about your feelings toward​ risk?

d.Assume that solar farm​'s most likely outcome is 21​% per year and that all other facts remain the same. Does this change your answer to part
​c?

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