Reconsider the following problem from Chapter 1: A four-year financial project is forecast to have net cash

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Reconsider the following problem from Chapter 1: A four-year financial project is forecast to have net cash inflows of $20,000; $25,000; $30,000; and $50,000 in the next 4 years. It will cost $75,000 to implement the project, payable at the beginning of the project. If the required rate of return is 0.2, conduct a discounted cash flow calculation to determine the NPV. Now, however, assume that the net cash inflows are probabilistic variables. Further assume that each forecast net cash inflow is normally distributed with standard deviations of $1,000, $1,500, $2,000, and $3,500, respectively. Given a required rate of return of 0.2, find the mean forecast NPV using Crystal Ball®. What is the probability that the actual NPV will be positive?
Discounted Cash Flows
What is Discounted Cash Flows? Discounted Cash Flows is a valuation technique used by investors and financial experts for the purpose of interpreting the performance of an underlying assets or investment. It uses a discount rate that is most...
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Project Management in Practice

ISBN: 978-1119385622

6th edition

Authors: Jack R. Meredith, Scott M. Shafer, Samuel J. Mantel, Jr., Margaret M. Sutton

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