P12-5

Scenario analysisAutomated Food Distribution Corp. (AFDC) produces vending machines and places them in public buildings. The company has obtained permission to place one of its machines in a local library. The company makes two types of machines. One distributes soft drinks, and the other distributes snack foods. AFDC expects both machines to provide benefits over a 10-year period, and each has a required investment of $3,000. The firm uses a 10% cost of capital. Management has constructed the following table of estimates of annual cash inflows for pessimistic, most likely, and optimistic results.