55. A proposed project has the following cash fl ow estimates.

Assuming independent cash fl ows, a normally distributed net present value, and a minimum attractive rate of return of 18%, determine the following.
For the following questions, determine an analytical solution:

a. the mean and standard deviation of net present value

b. the probability that the net present value is positive

c. the probability that the net present value is greater than $5,000 Assume the initial investment and annual receipts are normally distributed.

d. Using a Monte Carlo simulation with 10,000 iterations, estimate the probability that the present worth is positive and estimate the probability that the present worth is greater than $5,000.

Transcribed Image Text:

End of Year 0 Mean Net Cash Flow Standard Deviation of Cash Flow -$32,000 $1,000 - 1 $4,000 $2,000 2 $8,000 $3,000 3 $12,000 $5,000 4 $12,000 $6,000 LO 5 $12,000 $7,000