Dubai Secretarial Services is considering the purchase of one of two new personal computers, P and Q. The company expects both to provide benefits over a 10­year period, and each has a required investment of US$3,000. The firm uses a 10 percent cost of capital. Management has constructed the following table of estimates of annual cash inflows for pessimistic, most likely, and optimistic results.

a. Determine the range of annual cash inflows for each of the two computers.
b. Construct a table similar to this for the NPVs associated with each outcome for both computers.
c. Find the range of NPVs, and subjectively compare the risks associated with purchasing these computers.

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Computer P Computer Q Initial investment (CFo) Outcome Pessimistic Most likely Optimistic USS3,000 USS3,000 Annual cash inflows (CF) USS 500 USS 400 750 1,200 750 1,000