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Q3. A 4-year financial project has estimates of net cash flows shown in the following table. It will cost 65,000 to implement the project, all
Q3. A 4-year financial project has estimates of net cash flows shown in the following table. It will cost 65,000 to implement the project, all of which must be invested at the beginning of the project. After the fourth year, the project will have no residual value (the project will be scrapped at zero value). Assume that the cash flow estimates for each year are best represented by a triangular distribution and that the hurdle rate is 20 percent. a. Use @Risk to find the expected NPV of the project (Use 1000 iterations). b. If an inflation rate of 2 percent, normally distributed with a standard deviation of .333 percent, is assumed, what is the expected NPV of the project, and what is the probability that it will qualify (what is the probability of obtaining a positive NPV)? (Use 1000 iterations) Show the output frequency distribution and summary statistics in your solution
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