Douglas Keel, a financial analyst for Orange Industries, wishes to estimate the rate of return for two similar-risk investments, X and Y.
Douglas Keel, a financial analyst for Orange Industries, wishes to honor the reprimand of recur for two similar-risk bombardments, X and Y. Douglas's scrutiny indicates that the direct gone-by recurs succeed benefit as serious honors of coming recurs. A year antecedent, bombardment X had a dispense esteem of $20,000, and bombardment Y had a dispense esteem of $55,000. During the year, bombardment X generated capital issue of $1,500, and bombardment Y generated capital issue of $6,800. The popular dispense esteems of bombardments X and Y are $21,000 and $55,000, respectively.
a. Calculate the expected reprimand of recur on bombardments X and Y using the most late year's grounds.
b. Assuming the two bombardments are equally intrepid, which one should Douglas confide? Why?