Basic scenario analysis Prime Paints is in the process of eva The firm's financial analysts have developed pessimistic, most li associated with each project. These estimates are shown in the Initial investment (CF) Outcome Pessimistic Most likely Optimistic Project A $12,500 Annual cash i $890 1,650 2,440 a. Determine the range of annual cash inflows for each of the tw b. Assume that the firm's cost of capital is 9.3% and that both o

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
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Basic scenario analysis Prime Paints is in the process of evaluating two mutually exclusive additions to its processing capacity.
The firm's financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows
associated with each project. These estimates are shown in the following table.
Initial investment (CF)
Outcome
Pessimistic
Most likely
Optimistic
Project A
$12,500
Annual cash inflows (CF)
$890
1,650
2,440
Project B
$12.500
(EXER)
$1,540
1,650
1,800
a. Determine the range of annual cash inflows for each of the two projects.
b. Assume that the firm's cost of capital is 9.3% and that both prolects have 19-vear lives. Construct a table showing the NPVs for
Transcribed Image Text:O Basic scenario analysis Prime Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table. Initial investment (CF) Outcome Pessimistic Most likely Optimistic Project A $12,500 Annual cash inflows (CF) $890 1,650 2,440 Project B $12.500 (EXER) $1,540 1,650 1,800 a. Determine the range of annual cash inflows for each of the two projects. b. Assume that the firm's cost of capital is 9.3% and that both prolects have 19-vear lives. Construct a table showing the NPVs for
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