A firm is in the process of assessing the economic prospects for a new bottling maching it is developing. Future research and development expenses could range from 4 to 9 million, with a most likely value around 7 million. The life of the product will be anywhere from 3 to 10 years. Yearly unit sales will range from 100 to 500 with a most likely value around 300. The machines will sell for between $20K and $25K each. The production cost of the machine is expected to be $13K but could be as low as $11K or as high as $15K. Firms discount rate is 10%.

What is the expected NPV for this new machine over 10 years.

What is the probability of a positive NPV?

Additional Requirements Min Pages: 1 Level of Detail: Show all work

I am working a problem that involves creating a Monte Carlo Simulation using Risk Solver in excel. It is based on an R&D question. I am trying to figure out, first - how to set up the FCF's to asses the NPV against and second, how to inject the probabilities into this set of variables. Other Requirements: This question is drawn from the textbook "Management Science" by S Powell and K Baker. It is Chapter 16 problem 2 pg 443. My required steps are to 1. create a base case 2. inject distributions for my 2 most important factors 3. analyze.