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A consumer electronics firm is trying to decide whether to invest $18M in a new plant for expanding its output of cell phones. Management forecasts
A consumer electronics firm is trying to decide whether to invest $18M in a new plant for expanding its output of cell phones. Management forecasts that the new expansion will generate incremental net cash flows over the next five years as follows: n 0 2 Expected Flow E(A.) Estimate of Standard Deviation, -$18M $0 $5M $8M $8M $9M $12M $10M $10M $5M $5M $3M a. If the firm's discount rate is 12%, determine the mean and variance of the NPW, assuming statistical independence among cash flows. b. If all annual cash flows are normally distributed with the means and variances as previously specified, compute the probability that the project will lose money
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