Expected Rate of Risk Capital Invested

Project Return (%) Estimate (Millions $)

1 12.6 6.8 6.4
2 14.8 6.2 45.8
3 9.2 4.2 9.2
4 6.1 6.2 17.2
5 21.4 8.2 34.2
6 7.5 3.2 14.8

B. The efficient frontier of R&D p

Ajax R&D Projects projects that have the highest ex
level of risk. In other words, any
9 expected rate of return for an eq
8 2 estimate cannot be on the efficie
7 chart in part a, which projects ap
6 3 5 efficient frontier?
6
Risk Estimate

5 Project number 5
4 1
3 4
2
1
0
4 6 8 10 12 14 16 18 20 22 24
Expected Rate of Return (%)
efficient frontier of R&D projects represents the set of
s that have the highest expected rate of return for a given
risk. In other words, any project that has a smaller
ed rate of return for an equivalent, or higher, risk
e cannot be on the efficient frontier. From the bubble
part a, which projects appear to be located on the
t frontier?

number 5