Most Optimistic Likely Pessimistic Capital investment $90,000 $100,000 $120,000 Useful life 12 years $30,000 $35,000 10 years $20,000 6 уears $0 $20,000 Market value Net annual $30,000 cash flow MARR 10% 10% 10% (per year)
Most Optimistic Likely Pessimistic Capital investment $90,000 $100,000 $120,000 Useful life 12 years $30,000 $35,000 10 years $20,000 6 уears $0 $20,000 Market value Net annual $30,000 cash flow MARR 10% 10% 10% (per year)
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
Problem 1PS
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Question
Suppose that, for a certain potential investment project, the optimistic, most likely, and pessimistic estimates are as shown in the accompanying table. Solve, a. What is the AW for each of the three estimation conditions? b. It is thought that the most critical factors are useful life and net annual cash flow. Develop a table showing the net AW for all combinations of the estimates for
these two factors, assuming all other factors to be at their most likely values.
Transcribed Image Text:Most
Optimistic
Likely
Pessimistic
Capital
investment
$90,000
$100,000 $120,000
Useful life
12 years
$30,000
$35,000
10 years
$20,000
6 уears
$0
$20,000
Market value
Net annual
$30,000
cash flow
MARR
10%
10%
10%
(per year)
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