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Johsson Co., is contemplating the acquisition of Tour Transport, a competing trucking firm, and estimates that during the next year the cash flow from the
Johsson Co., is contemplating the acquisition of Tour Transport, a competing trucking firm, and estimates that during the next year the cash flow from the Tour Transport acquisition will vary depending upon the state of the local economy as follow: A 1 2 (State of the economy) 3 Probability 4 Cash Flow for each scenario B Scenario I (Recession) 30% $(50,000) Scenario II (Normal) D Scenario III (Expansion) 20% $250,000 50% $150,000 a- Calculate the expected cash flow for the next year using estimates provided above. b- Assume the probability of recession increase to 40%, the normal scenario probability remains 50%, and the expansion probability drops to only 10%. What is your estimate of the expected cash flow for the next year under these circumstances
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