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Your company is evaluating the prospect of purchasing a new plant from a competitor. Because of the risk involved with the endeavor, the company wants you to evaluate the value of the project adjusting for certainty in cash flow payments likely to arise from the purchase. Evaluate the net present value of the following cash flows applying a 95 percent certainty equivalent and a 7 percent risk-free rate. Year 1 2 3 Cash Inflow 1,000,000 2,000,000 5,000,000 a. $1,762,946 b. $3,000,000 c. $963,774 d. $1,424,799

Your company is evaluating the prospect of purchasing a new plant from a competitor. Because of the risk involved with the endeavor, the company wants you to evaluate the value of the project adjusting for certainty in cash flow payments likely to arise from the purchase. Evaluate the net present value of the following cash flows applying a 95 percent certainty equivalent and a 7 percent risk-free rate. Year 1 2 3 Cash Inflow 1,000,000 2,000,000 5,000,000 a. $1,762,946 b. $3,000,000 c. $963,774 d. $1,424,799

Advanced Engineering Mathematics
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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Your company is evaluating the prospect of purchasing a new plant from a competitor. Because of the risk involved with the endeavor, the company wants you to evaluate the value of the project adjusting for certainty in cash flow payments likely to arise from the purchase. Evaluate the net present value of the following cash flows applying a 95 percent certainty equivalent and a 7 percent risk-free rate. Year Cash Inflow 1 1,000,000 2 3 2,000,000 5,000,000 a. $1,762,946 b. $3,000,000 c. $963,774 d. $1,424,799
Transcribed Image Text:Your company is evaluating the prospect of purchasing a new plant from a competitor. Because of the risk involved with the endeavor, the company wants you to evaluate the value of the project adjusting for certainty in cash flow payments likely to arise from the purchase. Evaluate the net present value of the following cash flows applying a 95 percent certainty equivalent and a 7 percent risk-free rate. Year Cash Inflow 1 1,000,000 2 3 2,000,000 5,000,000 a. $1,762,946 b. $3,000,000 c. $963,774 d. $1,424,799
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