How much is the expected cash flow disregarding other simulations? How much is the expected value of your investment in machine using Monte Carlo Simulations? Will you invest in the new released equipment, yes or no? Prove it with your solution/s.
How much is the expected cash flow disregarding other simulations? How much is the expected value of your investment in machine using Monte Carlo Simulations? Will you invest in the new released equipment, yes or no? Prove it with your solution/s.
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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- How much is the expected cash flow disregarding other simulations?
- How much is the
expected value of your investment in machine using Monte Carlo Simulations? - Will you invest in the new released equipment, yes or no? Prove it with your solution/s.
Transcribed Image Text:ABC Company is making a decision whether to invest in a new released equipment
for their manufacturing operations. It will cost them P5,000,000 and has a total useful
life of 10 years with a salvage value of P500,000. The expected cash flows from year
1 to year 10 is presented in the table below:
EXPECTED CA SHFLOW
P1,000,000
900,000
800,000
YEAR
1
4
700,000
650,000
640,000
600,000
590,000
500,000
450,000
6.
7
9.
10
This equipment will also save them from maintenance cost of P10,000 and additional
5% on top of the previous maintenance cost yearly. The company expects at least
500 possible scenarios regarding net cash flows to be realized in the span of 10
years (for consistency, use the random numbers from 1 to 500). The discount rate is
12%.
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