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Refer to the XYZ Company example in the chapter and the results in Panels A and B of Exhibit 1 2 . 7 . On
Refer to the XYZ Company example in the chapter and the results in Panels A and of Exhibit On the basis of this information,
management of the company has decided to delay the implementation of the project for 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
Required:
Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows:
high medium and low
Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows:
high medium and low
Prepare a table containing the estimated NPV of the decision to delay for each combination of the following: riskfree rate of
interest and weightedaverage cost of capital and For example, one cell in your table would be
the estimated NPV of the project if the riskfree rate of interest is and the weightedaverage cost of capital is
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Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as
follows: high medium and low Enter your answers in millions. Do not round intermediate calculations.
Round your final answers to decimal places.
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