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Prime Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysts have developed pessimistic, most
Prime Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table. Initial investment (CF) Outcome Pessimistic Most likely Optimistic Project A $12,200 Project B $12,200 Annual cash inflows (CF) $850 $1,550 1,650 2,450 1,650 1,750 a. Determine the range of annual cash inflows for each of the two projects. b. Assume that the firm's cost of capital is 9.3% and that both projects have 15-year lives. Construct a table showing the NPVs for each project for each of the possible outcomes. Include the range of NPVs for each project. a. The range of annual cash inflows for project A is $ (Round to the nearest dollar.) The range of annual cash inflows for project B is $ (Round to the nearest dollar.) b. Assume that the firm's cost of capital is 9.3% and that both projects have 15-year lives. Complete the NPV table below for project A: (Round to the nearest cent.)
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