Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose that for a certain potential investment project, the optimistic, most likely, and pessimistic estimates are shown in the accompanying table. (Section 11.4) SHOW YOUR

Suppose that for a certain potential investment project, the optimistic, most likely, and pessimistic estimates are shown in the accompanying table. (Section 11.4) SHOW YOUR WORK

Optimistic

Most Likely

Pessimistic

Capital Investment

-$90,000

-$100,000

-$120,000

Useful life

12 years

10 years

6 years

Market value

$30,000

$20,000

$0

Net annual cash flow

$35,000

$30,000

$20,000

MARR (per year)

10%

10%

10%

It is thought that the most critical factors are useful life and net annual cash flow. Develop a table showing the net AW for all combinations of estimates for these two factors, assuming all other factors to be at theirpessimestic values.

A)

Net Annual Cash Flow

O

ML

P

Useful Life

O

$21,256

$16,256

$6,256

ML

$19,984

$14,984

$4,984

P

$14,632

$9,632

-$368

B)

Net Annual Cash Flow

O

ML

P

Useful Life

O

$23,192

$18,192

$8,192

ML

$22,238

$17,238

$7,238

P

$18,224

$13,224

$3,224

C)

Net Annual Cash Flow

O

ML

P

Useful Life

O

$17,384

$12,384

$2,384

ML

$15,476

$10,476

$476

P

$7,448

$2,448

-$7,552

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Contemporary Quantitative Finance

Authors: Carl Chiarella, Alexander Novikov

2010th Edition

3642034780, 978-3642034787

More Books

Students also viewed these Finance questions

Question

List three consequences of discrimination against minorities.

Answered: 1 week ago

Question

16. What behavioral changes do cytokines stimulate?

Answered: 1 week ago