Question
(F) Wheel has two other possible investment opportunities, which are mutually exclusive, and independent of Investment A above. Both investments will cost $120,000 and have
(F) Wheel has two other possible investment opportunities, which are mutually exclusive, and independent of Investment A above. Both investments will cost $120,000 and have a life of 6 years. The after tax cash flows are expected to be the same over the six year life for both projects, and the probabilities for each year's after tax cash flow is given in the table below. Investment B Investment C Probability After Tax Cash Flow Probability After Tax Cash Flow Investment B Investment C 0.25 $20,000 0.30 $22,000 0.50 32,000 0.50 40,000 0.25 40,000 0.20 50,000
Investment B |
|
Probability | After Tax Cash Flow |
0.25 | $20,000 |
0.50 | 32,000 |
0.25 | 40,000 |
Investment C |
|
Probability | After Tax Cash Flow |
0.30 | $22,000 |
0.50 | 40,000 |
0.20 | 50,000
|
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