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A company is considering an investment project proposal. The project requires a fixed initial investment of $100,000 and has a life of 4 years with
A company is considering an investment project proposal. The project requires a fixed initial investment of $100,000 and has a life of 4 years with uncertain cash flows as follows: EoY 1 2 3 4 Expected value of Standard deviation cash flow of cash flow $ 40,000 $ 600 $ 60,000 $ 600 $ 40,000 $ 800 $ 60,000 $ 800 The company's MARR is 10%. i. What is the Expected Value of the Present Worth of the project? (4 marks) ii. What is the Standard Deviation of the Present Worth of the project if all the cash flows are mutually independent? (4 marks) If some of the cash flows are not mutually independent and are positively correlated instead, would you expect the Expected Value of PW to increase, decrease, or remain the same? Explain. (2 marks) If some of the cash flows are not mutually independent and are positively correlated instead, would you expect the Standard Deviation of PW to increase, decrease, or remain the same? Explain
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