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Refer to the XYZ Company example in the chapter and the results in Panels A and B of Exhibit. 12.7. On the basis of this information, management of the company has decided to delay the implementation of the project for 1 year. Those managers are now interested in knowing how sensitive this decision is with respect to the assumptions they've made regarding the basic analysis. Therefore, they have asked you to prepare some supplementary analyses regarding Panel B of Exhibit 12.7 Required: 1. Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (20%), medium (42%), and low (38 %)? 2. Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (14%), medium (48%), and low (38 %)? 3. Prepare a 5x 3 table containing the estimated NPV of the decision to delay for each combination of the following: risk-free rate of interest (7%, 8%, 9%) and weighted-average cost of capital (10%, 11%, 12%, 13%, and 14 %). For example, one cell in your table would be the estimated NPV of the project if the risk-free rate of interest is 7% and the weighted-average cost of capital is 10%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (20%), medium (42%), and low (38 %)? (Enter your answers in millions. Do not round intermediate calculations. Round your final answers to 3 decimal places.) Scenario NPV (@1-0) High Medium Low Total Required 1 Required 2 > EXHIBIT 12.7 Decision Trees: Real-Options Analysis (Investment-Timing Option) A B C D E F G H 1 Panel A: Expected NPV--Invest in Project Today (time 0); amounts in 5 millions 2 3 Discount rate (WACC) = 15.00% 4 5 Cash Outflow Market Demand End-of-Period Cash Inflows NPV of Weighted 6 @time 0 Probability 1 2 3 Scenario NPV (Scenario) High 7 0.25 $70 $70 $70 $59.826 $14.956 8 $100 Medium 0.50 $50 $50 $50 $14.161 $7.081 9 Low 0.25 $5 $5 $5 ($88.584) (522.146) 10 1.00 Expected NPV = (50.109) 11 12 Panel B: Expected NPV--Delay Investment by One Year, Only if NPV is increased, amounts in 5 millions 13 14 Discount rate (WACC)- 15.00% 15 Risk-free rate= 5.00% 16 Cash outflow one year from the presenet (?) = $100 17 18 Market Demand End-of-Period Cash Flows PV of Cash 19 Probability 2 2 4 Outflows 20 (Scenario) High Medium 0.25 ($100) $70 $70 $70 ($95.24) $138.979 0.50 ($100) $50 $50 $50 ($95.24) $99.271 Low 0.25 $0 $0 $0 $0 $0.000 $0.00 Expected NPV = 1.00 "discounted at risk-free rate of interest 25 **discounted at WACC (weighted-average cost of capital); formula for cell 120: PV(814,1.(PV(814,3,E20))) ***formula for cellJ20:=C20 (120+H20) ANAAN* 21 22 23 24 26 27 PV of Cash Inflows Weighted NPV @time 0*** $10.94 $2.016 $0.000 $12.951 Refer to the XYZ Company example in the chapter and the results in Panels A and B of Exhibit 12.7. On the basis of this information, management of the company has decided to delay the implementation of the project for 1 year. Those managers are now interested in knowing how sensitive this decision is with respect to the assumptions they've made regarding the basic analysis. Therefore, they have asked you to prepare some supplementary analyses regarding Panel B of Exhibit 12.7 Required: 1. Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (20%), medium (42%), and low (38%) ? 2. Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (14%), medium (48%), and low (38 %)? 3. Prepare a 5x 3 table containing the estimated NPV of the decision to delay for each combination of the following: risk- free rate of interest (7%, 8%, 9%) and weighted-average cost of capital (10%, 11%, 12%, 13%, and 14 %). For example, one cell in your table would be the estimated NPV of the project if the risk-free rate of interest is 7% and the weighted average cost of capital is 10%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (14%), medium (48%), and low (38 %) ? (Enter your answers in millions. Do not round intermediate calculations. Round your final answers to 3 decimal places.) Scenario NPV (@t=0) High Medium Low Total Check my work regarding the basic analysis, inerefore, they have asked you to prepare some supplementary analyses regarding Panel b of Exhibit 12.7 Required: 1. Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (20%), medium (42%), and low (38%) ? 2. Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios ar as follows: high (14%), medium (48%), and low (38%)? 3. Prepare a 5x 3 table containing the estimated NPV of the decision to delay for each combination of the following: risk- free rate of interest (7%, 8%, 9%) and weighted average cost of capital (10%, 11%, 12%, 13%, and 14 %). For example, one cell your table would be the estimated NPV of the project if the risk-free rate of interest is 7% and the weighted-average cost of capital is 10%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a 5 x 3 table containing the estimated NPV of the decision to delay for each combination of the following: risk-free rate of interest (7%, 8%, 9%) and weighted-average cost of capital (10%, 11%, 12%, 13%, and 14 %). For example, one cell in your table would be the estimated NPV of the project if the risk-free rate of interest is 7% and the weighted-average cost of capital is 10%. (Enter your answers in millions. Do not round intermediate calculations. Round your final answers to 2 decimal places.) Show less A Risk-Free Rate 8% 7% 9% WACC 10% WACC 11% WACC 12% WACC 13% WACC 14% Demuleed & Refer to the XYZ Company example in the chapter and the results in Panels A and B of Exhibit. 12.7. On the basis of this information, management of the company has decided to delay the implementation of the project for 1 year. Those managers are now interested in knowing how sensitive this decision is with respect to the assumptions they've made regarding the basic analysis. Therefore, they have asked you to prepare some supplementary analyses regarding Panel B of Exhibit 12.7 Required: 1. Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (20%), medium (42%), and low (38 %)? 2. Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (14%), medium (48%), and low (38 %)? 3. Prepare a 5x 3 table containing the estimated NPV of the decision to delay for each combination of the following: risk-free rate of interest (7%, 8%, 9%) and weighted-average cost of capital (10%, 11%, 12%, 13%, and 14 %). For example, one cell in your table would be the estimated NPV of the project if the risk-free rate of interest is 7% and the weighted-average cost of capital is 10%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (20%), medium (42%), and low (38 %)? (Enter your answers in millions. Do not round intermediate calculations. Round your final answers to 3 decimal places.) Scenario NPV (@1-0) High Medium Low Total Required 1 Required 2 > EXHIBIT 12.7 Decision Trees: Real-Options Analysis (Investment-Timing Option) A B C D E F G H 1 Panel A: Expected NPV--Invest in Project Today (time 0); amounts in 5 millions 2 3 Discount rate (WACC) = 15.00% 4 5 Cash Outflow Market Demand End-of-Period Cash Inflows NPV of Weighted 6 @time 0 Probability 1 2 3 Scenario NPV (Scenario) High 7 0.25 $70 $70 $70 $59.826 $14.956 8 $100 Medium 0.50 $50 $50 $50 $14.161 $7.081 9 Low 0.25 $5 $5 $5 ($88.584) (522.146) 10 1.00 Expected NPV = (50.109) 11 12 Panel B: Expected NPV--Delay Investment by One Year, Only if NPV is increased, amounts in 5 millions 13 14 Discount rate (WACC)- 15.00% 15 Risk-free rate= 5.00% 16 Cash outflow one year from the presenet (?) = $100 17 18 Market Demand End-of-Period Cash Flows PV of Cash 19 Probability 2 2 4 Outflows 20 (Scenario) High Medium 0.25 ($100) $70 $70 $70 ($95.24) $138.979 0.50 ($100) $50 $50 $50 ($95.24) $99.271 Low 0.25 $0 $0 $0 $0 $0.000 $0.00 Expected NPV = 1.00 "discounted at risk-free rate of interest 25 **discounted at WACC (weighted-average cost of capital); formula for cell 120: PV(814,1.(PV(814,3,E20))) ***formula for cellJ20:=C20 (120+H20) ANAAN* 21 22 23 24 26 27 PV of Cash Inflows Weighted NPV @time 0*** $10.94 $2.016 $0.000 $12.951 Refer to the XYZ Company example in the chapter and the results in Panels A and B of Exhibit 12.7. On the basis of this information, management of the company has decided to delay the implementation of the project for 1 year. Those managers are now interested in knowing how sensitive this decision is with respect to the assumptions they've made regarding the basic analysis. Therefore, they have asked you to prepare some supplementary analyses regarding Panel B of Exhibit 12.7 Required: 1. Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (20%), medium (42%), and low (38%) ? 2. Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (14%), medium (48%), and low (38 %)? 3. Prepare a 5x 3 table containing the estimated NPV of the decision to delay for each combination of the following: risk- free rate of interest (7%, 8%, 9%) and weighted-average cost of capital (10%, 11%, 12%, 13%, and 14 %). For example, one cell in your table would be the estimated NPV of the project if the risk-free rate of interest is 7% and the weighted average cost of capital is 10%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (14%), medium (48%), and low (38 %) ? (Enter your answers in millions. Do not round intermediate calculations. Round your final answers to 3 decimal places.) Scenario NPV (@t=0) High Medium Low Total Check my work regarding the basic analysis, inerefore, they have asked you to prepare some supplementary analyses regarding Panel b of Exhibit 12.7 Required: 1. Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows: high (20%), medium (42%), and low (38%) ? 2. Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios ar as follows: high (14%), medium (48%), and low (38%)? 3. Prepare a 5x 3 table containing the estimated NPV of the decision to delay for each combination of the following: risk- free rate of interest (7%, 8%, 9%) and weighted average cost of capital (10%, 11%, 12%, 13%, and 14 %). For example, one cell your table would be the estimated NPV of the project if the risk-free rate of interest is 7% and the weighted-average cost of capital is 10%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a 5 x 3 table containing the estimated NPV of the decision to delay for each combination of the following: risk-free rate of interest (7%, 8%, 9%) and weighted-average cost of capital (10%, 11%, 12%, 13%, and 14 %). For example, one cell in your table would be the estimated NPV of the project if the risk-free rate of interest is 7% and the weighted-average cost of capital is 10%. (Enter your answers in millions. Do not round intermediate calculations. Round your final answers to 2 decimal places.) Show less A Risk-Free Rate 8% 7% 9% WACC 10% WACC 11% WACC 12% WACC 13% WACC 14% Demuleed &