Answered step by step
Verified Expert Solution
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
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 55 0.40 70 @.20 85 @.40 Year 5 Cash Inflow Probability 40 0.30 70 0.40 100 @.30 Year 19 Cash Inflow Probability 20 8.40 70 9.29 120 0.40 The expected value for all three years is $70. a. Compute the standard deviation for each of the three years. (Round the final answers to 2 decimal places.) Standard deviation Year 1 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 1 5 PVIF 7 Percent .935 PVIF 14 Percent @.877 Difference 0.058 10 standard deviation Year 1 Year 5 Year 19 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.) PVIF 7 Percent 0.935 PVIF 14 percent 0.877 Difference 0.058 Year 1 5 10 d. This part of the question is not part of your Connect assignment. e-1. Assume the initial investment is $125. What is the net present value of the expected values of $70 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
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started