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?

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Expected Valaes Distributionral Assumptions Paranieter Estimates Sales units Unit price Fixed operating costs Variable operating costs per unit Uniform Normal NA Triangular Maximum 150,000, minimum 50,000 Mean $50, standard deviation $10 NA Minimum-$30, most likely-$35, and maximum -$40 NA NA Minimum $60,00, maximum SR000 Minimum -$18,000, most likely $20,000, and maximum- $22000 5 50 120,000 35 Tax rate Depreciation expense CAPEX Working capital investment NA NA Uniform $ 60000 75000