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05) The MC C ompany is evaluating an investment proposal, which faces uncertainty ree important variables -original cost, useful life and annual net cash flow
05) The MC C ompany is evaluating an investment proposal, which faces uncertainty ree important variables -original cost, useful life and annual net cash flow Original cost Value S60000 S70,000 90000 Useful Life Prob 0.3 Annual cash inflows Prob 0.1 0.3 0.4 0.2 Value Period 5 years 0.66 years 7 years Prob 0.4 0.4 0.2 10,000 $15000 $20,000 $25000 0.1 e firm wants to perform five simulations runs of this project's life. The firm's cost of capital is 15 per cent and risk free rate is 6 per cent. To simulate the probability distribution of original cost, useful life and annual net cash flows the following set of random numbers can be used. 09,84,41,92,65,24,38,73,07,04,07,48,57,64,72 respectively. Use the random numbers in sequence for original cost, useful life and annual cash flows. Determine the NPV for each of the five simulation runs. 10 marks tiondetails The cost of initial
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