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Assignment Print View 1 of 21 1. http://ezto.mheducation.com/hm.tpx Award: 1.00 point Assume a corporation has earnings before depreciation and taxes of $102,000, depreciation of $40,000, and that it has a 35 percent tax bracket. a. Compute its cash flow using the following format. (Input all answers as positive values.) Earnings before depreciation and taxes Depreciation $ Earnings before taxes Taxes $ Earnings after taxes Depreciation $ Cash flow $ b. How much would cash flow be if there were only $12,000 in depreciation? All other factors are the same. Cash flow $ c. How much cash flow is lost due to the reduced depreciation from $40,000 to $12,000? Cash flow lost $ Hints Hint #1 References Worksheet 2. Difficulty: Basic Learning Objective: 12-02 Cash flow rather than earnings is used in the capital budgeting decision. Award: 1.00 point 9/28/2015 6:45 PM Assignment Print View 2 of 21 http://ezto.mheducation.com/hm.tpx The Short-Line Railroad is considering a $120,000 investment in either of two companies. The cash flows are as follows: Year 1 2 3 4 - 10 Electric Co. Water Works $ 60,000 $ 30,000 30,000 30,000 30,000 60,000 20,000 20,000 a. Compute the payback period for both companies. (Round your answers to 1 decimal place.) Electric Co. Water Works Payback Period years years b. Which of the investments is superior from the information provided? Water Works Electric Co. rev: 04_16_2014_QC_48106, 08_08_2014_QC_48106 References Worksheet 3. Difficulty: Basic Learning Objective: 12-03 The payback method considers the importance of liquidity, but fails to consider the time value of money. Award: 2.00 points X-treme Vitamin Company is considering two investments, both of which cost $38,000. The cash flows are as follows: Year 1 2 3 Project A $40,000 10,000 15,000 Project B $36,000 9,000 20,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.) Project A Project B Payback Period year(s) year(s) a-2. Which of the two projects should be chosen based on the payback method? Project A Project B 9/28/2015 6:45 PM Assignment Print View 3 of 21 http://ezto.mheducation.com/hm.tpx b-1. Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places.) Project A Project B Net Present Value $ $ b-2. Which of the two projects should be chosen based on the net present value method? Project A Project B c. Should a firm normally have more confidence in the payback method or the net present value method? Net present value method Payback method Hints Hint #1 References Worksheet Difficulty: Basic 4. Learning Objective: 12-03 The payback method considers the importance of liquidity, but fails to consider the time value of money. Learning Objective: 12-04 The net present value and internal rate of return are generally the preferred methods of capital budgeting analysis. Award: 1.00 point You buy a new piece of equipment for $30,204, and you receive a cash inflow of $4,100 per year for 14 years. Use Appendix D for an approximate answer but calculate your final answer using the financial calculator method. What is the internal rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Internal rate of return rev: 02_11_2015_QC_CS-7555 % 9/28/2015 6:45 PM Assignment Print View 4 of 21 http://ezto.mheducation.com/hm.tpx References Worksheet 5. Difficulty: Basic Learning Objective: 12-04 The net present value and internal rate of return are generally the preferred methods of capital budgeting analysis. Award: 1.00 point Home Security Systems is analyzing the purchase of manufacturing equipment that will cost $68,000. The annual cash inflows for the next three years will be: Year 1 2 3 Cash Flow $34,000 32,000 27,000 Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the financial calculator method. a. Determine the internal rate of return. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Internal rate of return % b. With a cost of capital of 16 percent, should the equipment be purchased? Yes No References Worksheet 6. Difficulty: Basic Learning Objective: 12-04 The net present value and internal rate of return are generally the preferred methods of capital budgeting analysis. Award: 2.00 points The Pan American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The net cost of this machine is $56,000. The annual cash flows have the following projections. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year Cash Flow 1 $ 23,000 2 23,000 3 25,000 4 28,000 5 16,000 9/28/2015 6:45 PM Assignment Print View 5 of 21 http://ezto.mheducation.com/hm.tpx a. If the cost of capital is 10 percent, what is the net present value of selecting a new machine? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Net present value $ b. What is the internal rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Internal rate of return % c. Should the project be accepted? Yes No rev: 04_08_2014_48104 Hints Hint #1 References Worksheet 7. Difficulty: Intermediate Learning Objective: 12-04 The net present value and internal rate of return are generally the preferred methods of capital budgeting analysis. Award: 1.00 point Turner Video will invest $68,500 in a project. The firm's cost of capital is 6 percent. The investment will provide the following inflows. Use Appendix A for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year 1 2 3 4 5 Inflow $ 20,000 22,000 26,000 30,000 34,000 The internal rate of return is 13 percent. a. If the reinvestment assumption of the net present value method is used, what will be the total value of the inflows after five years? (Assume the inflows come at the end of each year.) (Do not round intermediate calculations and round your answer to 2 decimal places.) Total value of inflows $ 9/28/2015 6:45 PM Assignment Print View 6 of 21 http://ezto.mheducation.com/hm.tpx b. If the reinvestment assumption of the internal rate of return method is used, what will be the total value of the inflows after five years? (Use the given internal rate of return. Do not round intermediate calculations and round your answer to 2 decimal places.) Total value of inflows $ c. Which investment assumption is better? Reinvestment assumption of IRR Reinvestment assumption of NPV Hints Hint #1 References Difficulty: Intermediate Worksheet 8. Learning Objective: 12-04 The net present value and internal rate of return are generally the preferred methods of capital budgeting analysis. Award: 2.00 points Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H represents an investment in a hydraulic lift. Keller wishes to use a net present value profile in comparing the projects. The investment and cash flow patterns are as follows: Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Project E ($33,000 investment) Year Cash Flow 1 $ 8,000 2 11,000 3 17,000 4 19,000 Project H ($33,000 investment) Year Cash Flow 1 $ 15,000 2 17,000 3 16,000 a. Determine the net present value of the projects based on a zero percent discount rate. Project E Project H Net Present Value $ $ b. Determine the net present value of the projects based on a discount rate of 12 percent. (Do not round intermediate calculations and round your answers to 2 decimal places.) Project E Project H Net Present Value $ $ 9/28/2015 6:45 PM Assignment Print View 7 of 21 http://ezto.mheducation.com/hm.tpx c. If the projects are not mutually exclusive, which project(s) would you accept if the discount rate is 12 percent? Project E Project H Both H and E References Worksheet 9. Difficulty: Challenge Learning Objective: 12-04 The net present value and internal rate of return are generally the preferred methods of capital budgeting analysis. Award: 4.00 points Telstar Communications is going to purchase an asset for $560,000 that will produce $270,000 per year for the next four years in earnings before depreciation and taxes. The asset will be depreciated using the three-year MACRS depreciation schedule in Table 12-12. (This represents four years of depreciation based on the half-year convention.) The firm is in a 30 percent tax bracket. Fill in the schedule below for the next four years. (Input all amounts as positive values. Round your answers to the nearest whole dollar amount.) Year 1 Year 2 Year 3 Year 4 Earnings before depreciation and taxes Depreciation $ $ $ $ Earnings before taxes Taxes $ $ $ $ Earnings after taxes Depreciation $ $ $ $ Cash flow $ $ $ $ Hints Hint #1 References Worksheet 10. Difficulty: Challenge Learning Objective: 12-02 Cash flow rather than earnings is used in the capital budgeting decision. Award: 2.00 points 9/28/2015 6:45 PM Assignment Print View 8 of 21 http://ezto.mheducation.com/hm.tpx The Summitt Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $400,000 and the asset will provide the following stream of earnings before depreciation and taxes for the next four years: Use Table 12-12. Year 1 $ Year 2 Year 3 Year 4 180,000 236,000 82,000 74,000 The firm is in a 30 percent tax bracket and has a cost of capital of 12 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value $ b. Under the net present value method, should Summitt Petroleum Corporation purchase the asset? Yes No Hints Hint #1 References Worksheet 11. Difficulty: Challenge Learning Objective: 12-04 The net present value and internal rate of return are generally the preferred methods of capital budgeting analysis. Award: 2.00 points An asset was purchased three years ago for $165,000. It falls into the five-year category for MACRS depreciation. The firm is in a 35 percent tax bracket. Use Table 12-12. a. Compute the tax loss on the sale and the related tax benefit if the asset is sold now for $19,560. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to whole dollars.) Tax loss on the sale Tax benefit $ $ 9/28/2015 6:45 PM Assignment Print View 9 of 21 http://ezto.mheducation.com/hm.tpx b. Compute the gain and related tax on the sale if the asset is sold now for $65,060. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to whole dollars.) Taxable gain Tax obligation $ $ Hints Hint #1 References Worksheet 12. Difficulty: Challenge Learning Objective: 12-02 Cash flow rather than earnings is used in the capital budgeting decision. Award: 3.00 points DataPoint Engineering is considering the purchase of a new piece of equipment for $260,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $160,000 in nondepreciable working capital. Forty thousand dollars of this investment will be recovered after the sixth year and will provide additional cash flow for that year. Income before depreciation and taxes for the next six are shown in the following table. Use Table 12-11, Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year 1 2 3 4 5 6 Amount $ 191,000 164,000 134,000 119,000 97,000 87,000 The tax rate is 35 percent. The cost of capital must be computed based on the following: Debt Preferred stock Common equity (retained earnings) Kd Kp Cost (aftertax) 5.80% 11.60 Weights 35% 5 Ke 16.00 60 a. Determine the annual depreciation schedule. (Do not round intermediate calculations. Round your depreciation base and annual depreciation answers to the nearest whole dollar. Round your percentage depreciation answers to 3 decimal places.) 9/28/2015 6:45 PM Assignment Print View 10 of 21 http://ezto.mheducation.com/hm.tpx Year 1 2 3 4 5 6 Depreciation Base $ Percentage Depreciation Annual Depreciation $ $ b. Determine the annual cash flow for each year. Be sure to include the recovered working capital in Year 6. (Do not round intermediate calculations and round your answers to 2 decimal places.) Year 1 2 3 4 5 6 Cash Flow $ c. Determine the weighted average cost of capital. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Weighted average cost of capital % d-1. Determine the net present value. (Use the WACC from part c rounded to 2 decimal places as a percent as the cost of capital (e.g., 12.34%). Do not round any other intermediate calculations. Round your answer to 2 decimal places.) Net present value $ d-2. Should DataPoint purchase the new equipment? Yes No Hints Hint #1 References Worksheet Difficulty: Challenge Learning Objective: 12-05 The discount or cutoff rate is normally the cost of capital. 9/28/2015 6:45 PM Assignment Print View 11 of 21 13. http://ezto.mheducation.com/hm.tpx Award: 5.00 points Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $74,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $32,800. A new piece of equipment will cost $210,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year 1 2 3 4 5 6 Cash Savings $70,000 62,000 60,000 58,000 55,000 44,000 The firm's tax rate is 30 percent and the cost of capital is 13 percent. a. What is the book value of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Book value $ b. What is the tax loss on the sale of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Tax loss $ c. What is the tax benefit from the sale? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Tax benefit $ d. What is the cash inflow from the sale of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Cash inflow $ e. What is the net cost of the new equipment? (Include the inflow from the sale of the old equipment.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Net cost $ f. Determine the depreciation schedule for the new equipment. (Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places.) 9/28/2015 6:45 PM Assignment Print View 12 of 21 http://ezto.mheducation.com/hm.tpx Year 1 2 3 4 5 6 Depreciation Base $ Percentage Depreciation Annual Depreciation $ $ g. Determine the depreciation schedule for the remaining years of the old equipment. (Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places.) Year 1 2 3 4 Depreciation Base Percentage Depreciation $ Annual Depreciation $ h. Determine the incremental depreciation between the old and new equipment and the related tax shield benefits. (Enter the tax rate as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar.) Year 1 2 3 4 5 6 Depreciation on New Equipment $ Depreciation on Old Equipment $ Incremental Depreciation Tax Shield Benefits Tax Rate $ $ i. Compute the aftertax benefits of the cost savings. (Enter the aftertax factor as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar.) Year 1 2 3 4 5 6 Savings $70,000 62,000 60,000 58,000 55,000 44,000 Aftertax Savings (1 - Tax Rate) $ j-1. Add the depreciation tax shield benefits and the aftertax cost savings to determine the total annual benefits. (Do not round intermediate calculations and round your answers to the nearest whole dollar.) 9/28/2015 6:45 PM Assignment Print View 13 of 21 http://ezto.mheducation.com/hm.tpx Year 1 2 3 4 5 6 Tax Shield Benefits from Depreciation Aftertax Cost Savings $ Total Annual Benefits $ j-2. Compute the present value of the total annual benefits. (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Total annual benefits $ k-1. Compare the present value of the incremental benefits (j) to the net cost of the new equipment (e). (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar.) Net present value $ k-2. Should the replacement be undertaken? No Yes Hints Hint #1 References Difficulty: Challenge Worksheet 14. Learning Objective: 12-04 The net present value and internal rate of return are generally the preferred methods of capital budgeting analysis. Award: 2.00 points Assume you are risk-averse and have the following three choices. A B C Expected Value $ 1,830 2,760 1,680 Standard Deviation $ 970 1,850 1,330 a. Compute the coefficient of variation for each. (Round your answers to 3 decimal places.) Projects Coefficient of 9/28/2015 6:45 PM Assignment Print View 14 of 21 http://ezto.mheducation.com/hm.tpx Variation A B C b. Which project will you select? Project B Project C Project A Hints Hint #1 References Worksheet 15. Difficulty: Basic Learning Objective: 13-02 Most investors are risk-averse, which means they dislike uncertainty. Award: 2.00 points Myers Business Systems is evaluating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are given next: Possible Market Reaction Low response Moderate response High response Very high response Sales in Units 10 25 40 65 Probabilities .10 .20 .30 .40 a. What is the expected value of unit sales for the new product? (Do not round intermediate calculations and round your answer to the nearest whole unit.) Expected value units b. What is the standard deviation of unit sales? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation units Hints Hint #1 9/28/2015 6:45 PM Assignment Print View 15 of 21 http://ezto.mheducation.com/hm.tpx References Worksheet 16. Difficulty: Basic Learning Objective: 13-01 The concept of risk is based on uncertainty about future outcomes. It requires the computation of quantitative measures as well as qualitative considerations. Award: 3.00 points Shack Homebuilders Limited is evaluating a new promotional campaign that could increase home sales. Possible outcomes and probabilities of the outcomes are shown next. Possible Outcomes Ineffective campaign Normal response Extremely effective Additional Sales in Units Probabilities 60 .30 80 .50 160 .20 Compute the coefficient of variation. (Do not round intermediate calculations. Round your answer to 3 decimal places.) Coefficient of variation Hints Hint #1 References Worksheet 17. Difficulty: Basic Learning Objective: 13-01 The concept of risk is based on uncertainty about future outcomes. It requires the computation of quantitative measures as well as qualitative considerations. Award: 2.00 points Five investment alternatives have the following returns and standard deviations of returns. Returns: Alternatives Expected Value A $ 1,960 B 1,530 C 10,100 D 1,630 E 60,300 Standard Deviation $ 920 1,570 7,500 870 17,600 Calculate the coefficient of variation and rank the five alternatives from lowest risk to the highest risk by using the coefficient of variation. (Round your answers to 3 decimal places.) 9/28/2015 6:45 PM Assignment Print View 16 of 21 http://ezto.mheducation.com/hm.tpx Alternatives A B C D E Coefficient of Variation Rank References Worksheet 18. Difficulty: Basic Learning Objective: 13-01 The concept of risk is based on uncertainty about future outcomes. It requires the computation of quantitative measures as well as qualitative considerations. Award: 2.00 points Tim Trepid is highly risk-averse while Mike Macho actually enjoys taking a risk. Returns: Investments Expected Value Buy stocks $ 8,980 Buy bonds 7,680 Buy commodity futures 19,900 Buy options 15,100 Standard Deviation $ 6,590 2,670 28,000 18,600 a-1. Compute the coefficients of variation. (Round your answers to 3 decimal places.) Coefficient of Variation Buy Buy Buy Buy stocks bonds commodity futures options a-2. Which one of the following four investments should Tim choose? Buy bonds Buy stocks Buy commodity futures Buy options b. Which one of the four investments should Mike choose? Buy bonds Buy stocks Buy commodity futures Buy options 9/28/2015 6:45 PM Assignment Print View 17 of 21 http://ezto.mheducation.com/hm.tpx Hints Hint #1 References Difficulty: Basic Worksheet 19. Learning Objective: 13-02 Most investors are risk-averse, which means they dislike uncertainty. Award: 2.00 points Mountain Ski Corp. was set up to take large risks and is willing to take the greatest risk possible. Lakeway Train Co. is more typical of the average corporation and is risk-averse. Returns: Expected Value $262,000 735,000 183,000 139,000 Projects A B C D Standard Deviation $212,000 422,000 156,000 246,000 a-1. Compute the coefficients of variation. (Round your answers to 3 decimal places.) Coefficient of Variation Project Project Project Project A B C D a-2. Which projects should Mountain Ski Corp. choose? Project Project Project Project A B D C b. Which one of the four projects should Lakeway Train Co. choose based on the same criteria of using the coefficient of variation? Project Project Project Project C B D A Hints Hint #1 References 9/28/2015 6:45 PM Assignment Print View 18 of 21 http://ezto.mheducation.com/hm.tpx Worksheet 20. Difficulty: Basic Learning Objective: 13-02 Most investors are risk-averse, which means they dislike uncertainty. Award: 2.00 points Waste Industries is evaluating a $55,500 project with the following cash flows. Years Cash Flows 1 $ 9,120 2 20,200 3 26,600 4 16,300 5 26,300 The coefficient of variation for the project is .475. Coefficient of Variation Discount Rate 0 .25 7% .26 .50 9% .51 .75 13% .76 1.00 16% 1.01 1.25 19% Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Select the appropriate discount rate. 7% 19% 13% 9% 16% b. Compute the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value $ c. Based on the net present value should the project be undertaken? No Yes Hints Hint #1 9/28/2015 6:45 PM Assignment Print View 19 of 21 http://ezto.mheducation.com/hm.tpx References Difficulty: Intermediate Worksheet 21. Learning Objective: 13-03 Because investors dislike uncertainty, they will require higher rates of return from risky projects. Award: 2.00 points Dixie Dynamite Company is evaluating two methods of blowing up old buildings for commercial purposes over the next five years. Method one (implosion) is relatively low in risk for this business and will carry a 13 percent discount rate. Method two (explosion) is less expensive to perform but more dangerous and will call for a higher discount rate of 17 percent. Either method will require an initial capital outlay of $100,000. The inflows from projected business over the next five years are given next. Years 1 2 3 4 5 Method 1 $29,200 33,200 41,100 32,400 24,600 Method 2 $19,700 28,400 36,500 36,000 71,100 Use Appendix B for an approximate answer but calculate your final answers using the formula and financial calculator methods. a. Calculate net present value for Method 1 and Method 2. (Do not round intermediate calculations and round your answers to 2 decimal places.) Method 1 Method 2 Net Present Value $ $ b. Which method should be selected using net present value analysis? Method 1 Method 2 Neither of these Hints Hint #1 References Worksheet Difficulty: Intermediate Learning Objective: 13-03 Because investors dislike uncertainty, they will require higher rates of return from risky projects. 9/28/2015 6:45 PM Assignment Print View 20 of 21 22. http://ezto.mheducation.com/hm.tpx Award: 2.00 points Debby's Dance Studios is considering the purchase of new sound equipment that will enhance the popularity of its aerobics dancing. The equipment will cost $24,500. Debby is not sure how many members the new equipment will attract, but she estimates that her increased annual cash flows for each of the next five years will have the following probability distribution. Debby's cost of capital is 15 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods. Cash Flow $ 4,580 5,570 8,170 10,300 Probability .2 .4 .2 .2 a. What is the expected value of the cash flow? The value you compute will apply to each of the five years. Expected Cash Flow $ b. What is the expected net present value? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places. ) Net Present Value $ c. Should Debby buy the new equipment? Yes No Hints Hint #1 References Worksheet 23. Difficulty: Intermediate Learning Objective: 13-01 The concept of risk is based on uncertainty about future outcomes. It requires the computation of quantitative measures as well as qualitative considerations. Award: 2.00 points Highland Mining and Minerals Co. is considering the purchase of two gold mines. Only one investment will be made. The Australian gold mine will cost $1,630,000 and will produce $342,000 per year in years 5 through 15 and $537,000 per year in years 16 through 25. The U.S. gold mine will cost $2,054,000 and will produce $295,000 per year for the next 25 years. The cost of capital is 8 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods. (Note: In looking up present value factors for this problem, you need to work with the concept of a deferred annuity for the Australian mine. The returns in years 5 through 15 actually represent 11 years; 9/28/2015 6:45 PM Assignment Print View 21 of 21 http://ezto.mheducation.com/hm.tpx the returns in years 16 through 25 represent 10 years.) a-1. Calculate the net present value for each project. (Do not round intermediate calculations and round your answers to 2 decimal places.) Net Present Value $ $ The Australian mine The U.S. mine a-2. Which investment should be made? Australian mine U.S. mine b-1. Assume the Australian mine justifies an extra 3 percent premium over the normal cost of capital because of its riskiness and relative uncertainty of cash flows. Calculate the new net present value given this assumption. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Net Present Value $ The Australian mine b-2. Does the new assumption change the investment decision? Yes No rev: 11_12_2014_QC_58991 Hints Hint #1 References Worksheet Difficulty: Challenge Learning Objective: 13-01 The concept of risk is based on uncertainty about future outcomes. It requires the computation of quantitative measures as well as qualitative considerations. 9/28/2015 6:45 PM