Nextron Distribution is performing an analysis of the cash flows it hopes to earn from a major expansion of the firm’s operations into a new product line. The estimates needed for computing the annual free cash flow for the first year of operations are found below:
a. Construct a spreadsheet model for the year 1 free cash flow. What is your estimate of the expected cash flow?
b. Utilize the probability distributions and associated parameter estimates to construct a simulation model for the investment opportunity where free cash flow is the fore-cast variable in the model. 1. What is the expected free cash flow? 2. What is the probability that the free cash flow will drop below $ 500,000?

  • CreatedNovember 13, 2015
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