Question
Suppose that you are considering an investment project with a two-year life. If the annual cash flows are given in terms of three-point estimates and
Suppose that you are considering an investment project with a two-year life. If the annual cash flows are given in terms of three-point estimates and these cash flows are statistically independent of each other, compute the mean and variance of the NPW distribution. Use a risk-free discount rate of 10%.
| Period(n) | Pessimistic | Most Likely | Optimistic |
|---|---|---|---|
| 0 | -$10,000 | -$8,000 | -$7,000 |
| 1 | 5,000 | 12,000 | 15,000 |
| 2 | 4,000 | 10,000 | 13,000 |
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Fundamentals Of Financial Management
Authors: James Van Horne, John Wachowicz
13th Revised Edition
978-0273713630, 273713639
