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Metlock, Inc. is using a discounted cash flow model. Scenario 1: Cash flows are fairly certain $140/year for 5 years Risk-adjusted discount rate is
Metlock, Inc. is using a discounted cash flow model. Scenario 1: Cash flows are fairly certain $140/year for 5 years Risk-adjusted discount rate is 7% Risk-free discount rate is 3% Scenario 2: Cash flows are uncertain 75% probability that cash flows will be $140 in 5 years 25% probability that cash flows will be $85 in 5 years Risk-adjusted discount rate is 7% Risk-free discount rate is 3% Identify which model Metlock might use to estimate the discounted fair value under each scenario, and calculate the fair value. calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Scenario 1: Metlock might use Fair Value Scenario 2: traditional approach model. $ Metlock might use Fair Value $ expected cash flow model.
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