Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Caribou Pipeline Company projects a pattern of inflows from the investment shown in the following table. The inflows are spread over time to reflect

image text in transcribedimage text in transcribed

The Caribou Pipeline Company projects a pattern of inflows from the investment shown in the following table. The inflows are spread over time to reflect delayed benefits. Each year is independent of the others. Year 1 Cash Inflow Probability 65 0.40 80 0.20 95 0.40 Year 5 Cash Inflow Probability 50 0.35 80 0.30 110 0.35 Year 10 Cash Inflow Probability 40 0.30 80 0.40 120 0.30 The expected value for all three years is $80. a. Compute the standard deviation for each of the three years. (Round the final answers to 2 decimal places.) Year 1 Standard deviation 13.42 25.10 30.99 Year 5 Year 10 b. This part of the question is not part of your Connect assignment. c. Assuming a 7 percent and 14 percent discount rate, complete the table for present value factors. (Round the final answers to 3 decimal places.) Year PVIE 7 Percent 0.935 PVIF 14 Percent 0.877 Difference 0.058 1 5 10 d. This part of the question is not part of your Connect assignment. b. This part of the question is not part of your Connect assignment. c. Assuming a 7 percent and 14 percent discount rate, complete the table for present value factors. (Round the final answers to 3 decimal places.) Year 1 PVIE 7 Percent 0.935 PVIF 14 Percent 0.877 Difference 0.058 5 10 d. This part of the question is not part of your Connect assignment. e-1. Assume the initial investment is $155. What is the net present value of the expected values of $80 for the investment at a 14 percent discount rate?(Round "PV Factor" to 3 decimal places. Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round the final answer to 1 decimal place.) Net present value $ e-2. Should the investment be accepted? O No O Yes

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

Students also viewed these Finance questions