An Excel file (100 points): A spreadsheet showing your approach with your timeline, your calculations, and your solutions.

Question 1 (10 points): The current Powerball Jackpot is approximately $180,000,000. According to www.lotterycritic.com, the odds of winning the Powerball Jackpot are 1 in 292,201,338. If we ignore the odds of multiple jackpot winners and the possibility of winning minor prizes ($2.00, $4.00, $10.00, etc.), what is the Expected Present Value of a $2.00 Mega Millions Lottery Ticket?

Question 2 (30 points): Consider the following cash flow for an investment: Year 0 1 2 3 4 5 6 L = 10,000 C=-15,000 E = 15,000 C=-10,000 I=9,000 I=9,000 I=9,000 I=9,000 I=9,000 I=9,000 C: Investment Costs, I: Income, L: Salvage Value, E: Environmental Remediation Cost For a minimum ROR (i*) of 7.50 %, evaluate the sensitivity of the project's NPV using Sensitivity Analysis (OVAT Analysis). The range of the input data are: a) Year 0 Cost (+/- 5%): i.e., -$14,250, -$15,000, and -$15,750 b) Year 1 Cost (+/- 10%) for year 1 cost: i.e., -$9,000, -$10,000, and -$11,000 c) Incomes (+/-15%): i.e., $7,650, $9,000, and $10,350 d) Salvage value (+/-20%): i.e., $8,000, $10,000, and $12,000 e) Environmental Cost (+/- 20%), i.e., -$12,000, -$15,000, and -$18,000 f) Plot the tornado diagram with respect to the results from Parts a) through e) g) Rank the five uncertain inputs (two escalation rates, initial investment, salvage value, and remediation cost) based on the NPV sensitivity analysis

Question 3 (20 points): An investment project requires investment costs of -$125,000 at the present time and an additional investment of -$75,000 at year 1. There are three possible outcomes for this project: 10% probability of success, which yields: annual income of $80,000 from year 2 to year 10 with annual operating expenses (OPEX) of -$7,500 for year 2 through year 10, with a salvage value of $25,000 and with environmental remediation cost of -$50,000 at the end of the project in year 10. 55% probability of success, which yields: annual income of $70,000 from year 2 to year 7, with annual operating expenses (OPEX) of $7,500 for year 2 through year 7, with annual environmental remediation costs of -$5,000 from year 2 to year 7, and a salvage value of $15,000 at the end of year 7. 35% probability of failure: zero income for all the years and salvage value of $100,000 at the end of year 2 with no environmental remediation costs. Calculate the ENPV and conclude if this is a good investment, considering the minimum rate of return (discount rate) of 12.5%.

Question 4 (20 points): Assume an investment of $150,000 at the present time. There are two possibilities for this project: Success: The annual revenue of $60,000 for 12 years (from year 1 to 12) with no salvage value. Failure: Zero annual revenue and the salvage value of 75,000 at the end of year 1. What is minimum success probability that project can be economically satisfactory? In other words, what is the breakeven probability. Assume a minimum interest rate of return (i*) of 15%.

Question 5 (20 points): Calculate the ENPV for buying and drilling an oil lease assuming a minimum ROR (i*) of 8.0% and the following estimated costs and success/failure rates: The lease costs -$250,000 dollars at time zero and drilling will start at year 1 with a cost of -$100,000 dollars. There is a 100% probability of drilling a well if we decide to purchase the lease. Failure Case: There is a 70% that well is a dry hole without any production and will require an additional abandonment cost of -$75,000 in year 1. Success Cases: If drilling is successful (30%), then there are two possibilities: 1. Optimistic: A 40% probability that the well yields an annual income of $300,000 dollars for 14 years (from year 2 to year 15) with an abandonment cost of -$50,000 and environmental remediation cost of -$100,000 in year 15 2. Pessimistic: A 60% probability that the well yields annual income of $200,000 dollars for 11 years (from year 2 to year 12) with an abandonment cost of -$50,000 and environmental remediation cost of -$75,000 in year 12. Is this investment economically satisfactory? Explain your work in detail including all the required factors and calculations.