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Suppose a firm has an investment for a project proposal, requiring an outlay of RWF 200,000 at present (t=0). The investment proposal is expected to

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Suppose a firm has an investment for a project proposal, requiring an outlay of RWF 200,000 at present (t=0). The investment proposal is expected to have 2 years' economic life with no salvage value. In year 1 , there is a 0.3 probability ( 30% chance) that cash flow will be RWF 160,000 ; a 0.4 probability that cash flow will be RWF220 QQ0 and 0.3 probability thlat cash flow will be RWF300,000. In year 2, the cash flow possibilities depend on the cash that occurs in year 1 . That is, the cash flows for the year 2 are conditional on cash flow for the year 1 . Accordingly, the probabilities assigned with the cash flow of the year 2 are conditional probabilities. The estimated conditional cash flow and their associated conditional probabilities are as follows: Suppose a firm has an investment for a project proposal, requiring an outlay of RWF 200,000 at present (t=0). The investment proposal is expected to have 2 years' economic life with no salvage value. In year 1 , there is a 0.3 probability ( 30% chance) that cash flow will be RWF 160,000 ; a 0.4 probability that cash flow will be RWF220 QQ0 and 0.3 probability thlat cash flow will be RWF300,000. In year 2, the cash flow possibilities depend on the cash that occurs in year 1 . That is, the cash flows for the year 2 are conditional on cash flow for the year 1 . Accordingly, the probabilities assigned with the cash flow of the year 2 are conditional probabilities. The estimated conditional cash flow and their associated conditional probabilities are as follows

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