Haywood Industries: Evaluate Investment A and B

*See values in attachment*

Haywood Industries, has prepared the following information regarding two investments under consideration. Which investment should be accepted? Please provide supporting calculations for your choice.

A. Investment A is better. It has a higher expected return with less risk.

B. We cannot say which investment is "better". It would depend on the investor's attitude toward the risk-return trade-off.

C. Investment B is better. It has a higher expected return with less risk.

D. Investment A is better because a lower return means lower risk.

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...ock A Common Stock B
Probability Return Probability Return
0.20 2% 0.10 4%
0.50 18 0.30 6
0.30 27 0.40 10
0.20 15

Expected return on A =0.2*2%+0.5*18%+0.3*27%= 17.5%
Risk on A ...