Windsor Enterprises is using a discounted cash flow model. Identify which model Windsor might use to estimate the discounted fair value under each scenario, and calculate the fair value using the present value tables: Scenario 1: Cash flows are fairly certain $190/year for 5 years Risk-adjusted discount rate is 6% Risk-free discount rate is 4% (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25 Scenario 1: Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Windsor might use Fair value Scenario 2: Windsor might use Fair value Scenario 2: Cash flows are uncertain 75% probability that cash flows will be $190 in 5 years 25% probability that cash flows will be $70 in 5 years Risk-adjusted discount rate is 6% $ Risk-free discount rate is 4% $ ✓model. model.
Windsor Enterprises is using a discounted cash flow model. Identify which model Windsor might use to estimate the discounted fair value under each scenario, and calculate the fair value using the present value tables: Scenario 1: Cash flows are fairly certain $190/year for 5 years Risk-adjusted discount rate is 6% Risk-free discount rate is 4% (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25 Scenario 1: Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Windsor might use Fair value Scenario 2: Windsor might use Fair value Scenario 2: Cash flows are uncertain 75% probability that cash flows will be $190 in 5 years 25% probability that cash flows will be $70 in 5 years Risk-adjusted discount rate is 6% $ Risk-free discount rate is 4% $ ✓model. model.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Windsor Enterprises is using a discounted cash flow model. Identify which model Windsor might use to estimate the discounted fair
value under each scenario, and calculate the fair value using the present value tables:
Scenario 1: Cash flows are fairly certain
$190/year for 5 years
Risk-adjusted discount rate is 6%
Risk-free discount rate is 4%
Scenario 1:
(For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25.)
Windsor might use
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.
Fair value
Scenario 2:
Windsor might use
Scenario 2: Cash flows are uncertain
Fair value
75% probability that cash flows will be $190 in 5 years
25% probability that cash flows will be $70 in 5 years
Risk-adjusted discount rate is 6%
ta
Risk-free discount rate is 4%
model.
model.
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