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Q 7 ( Chapter 1 3 ) ( 1 6 marks ) ABC Corporation is considering launching a new project that entails an initial investment
QChapter marks
ABC Corporation is considering launching a new project that entails an initial investment and generates expected cash inflows over a fouryear period. This project, while promising, carries inherent risks that need careful analysis to ensure its viability and alignment with the corporation's financial goals.
a Discuss how cash flow estimation differs from profit estimation and the impact of this difference on project evaluation. marks
b How do systematic and unsystematic risks affect the decisionmaking process in financial management? Provide examples of each type of risk. marks
c Given the initial investment of $ forecasted cash inflows are $ for Year $ for Year $ for Year and $ for Year Operating costs are expected to be of the cash inflows, and the tax rate is Calculate the net cash flows for each year of the project's life. marks
d ABC Corporation's financial team has identified different probabilities for the Year cash inflow: a chance of being $ a chance of being $ and a chance of being $ Calculate the expected cash inflow for Year and its standard deviation to evaluate the project's risk profile. marks
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