General Forge and Foundry Co. is considering a three-year project that will require an initial investment of $40,000. If market demand is strong, General Forge and Foundry Co. thinks that the project will generate cash flows of $29,500 per year. However, if market demand is weak, the company believes that the project will generate cash flows of only $1,750 per year. The company thinks that there is a 50% chance that demand will be strong and a 50% chance that demand will be weak.   If the company uses a project cost of capital of 10%, what will be the expected net present value (NPV) of this project?   -$914   -$972   -$1,143   -$1,257

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A: Initial cost = $211,600 Cash flow first 3 years (1, 2, and 3 years) = $0 Cash flow next 3 years (4,…

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A: a) To calculate the expected net present value (NPV) of the project, we need to find the present…

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A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

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A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

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A: NPV means net present value.It is a capital budgeting technique used for making investment…

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A: The internal rate of return implies the quality of an investment. It displays the rate at which an…

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A: The payback period is the period in which the initial cash outflow has been recovered.It is the time…

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A: Calculation of NPV is shown below: Hence, the NPV is $130,327,287.03.

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Risk Management Techniques

Risk management is the procedure of recognizing, analyzing, monitoring, and preventing the risks and threatening factors of investments and business. Risks can arise from various factors including internal controls, market changes, natural disasters, and failure in productions. Risk management techniques enable entities to control and minimize the risks as well as the threatening factors of the business and it also helps to improve the business.