Greenhouse Corporation has compiled the following information on a capital expenditure proposal: (1) The projected cash inflows

Question:

Greenhouse has compiled the following information on a capital expenditure proposal:
(1) The projected cash inflows are normally distributed with a mean of US$36,000 and a standard deviation of US$9,000.
(2) The projected cash outflows are normally distributed with a mean of US$30,000 and a standard deviation of US$6,000.
(3) The firm has an 11 percent cost of capital. (4) The probability distributions of cash inflows and cash outflows are not expected to change over the project's 10year life.
a. Describe how the foregoing data can be used to develop a simulation model for finding the of the project.
b. Discuss the advantages of using a simulation to evaluate the proposed project.
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