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7. A project with a 3-year life has the following probability distributions for possible end- of-year cash flows in each of the next three years: Year 1 Prob Cash Flow Prob Cash Flow Prob Cash Flow 0.30 $300 0.15100 0.25 $200 0.40 500 0.35 200 Year 2 Year 3 0.75 800 0.30 700 0.35 600 0.15 900 Using an interest rate of 8 percent, find the expected present value of these

7. A project with a 3-year life has the following probability distributions for possible end- of-year cash flows in each of the next three years: Year 1 Prob Cash Flow Prob Cash Flow Prob Cash Flow 0.30 $300 0.15100 0.25 $200 0.40 500 0.35 200 Year 2 Year 3 0.75 800 0.30 700 0.35 600 0.15 900 Using an interest rate of 8 percent, find the expected present value of these

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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7. A project with a 3-year life has the following probability distributions for possible end- of-year cash flows in each of the next three years: Year 1 Prob Cash Flow Prob Cash Flow Prob Cash Flow 0.30 $300 0.15100 0.25 $200 0.40 500 0.35 200 0.75 800 Year 2 Year 3 0.30 700 0.35 600 0.15 900 Using an interest rate of 8 percent, find the expected present value of these uncertain cash flows. (Hint: Find the expected cash flow in each year, then evaluate those cash flows.) a.$1,204.95 b.$ 835.42 c.$1,519.21 d.$1,580.00 e$1,347.61
Transcribed Image Text:7. A project with a 3-year life has the following probability distributions for possible end- of-year cash flows in each of the next three years: Year 1 Prob Cash Flow Prob Cash Flow Prob Cash Flow 0.30 $300 0.15100 0.25 $200 0.40 500 0.35 200 0.75 800 Year 2 Year 3 0.30 700 0.35 600 0.15 900 Using an interest rate of 8 percent, find the expected present value of these uncertain cash flows. (Hint: Find the expected cash flow in each year, then evaluate those cash flows.) a.$1,204.95 b.$ 835.42 c.$1,519.21 d.$1,580.00 e$1,347.61
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