1. Basic scenario analysis Prime Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. Thefirm's financial analysts have developedpessimistic, mostlikely, and optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table.

Project A Project B Initial investment (CF) $12,300 $12,300 Outcome Annual cash inflows (CF ) Pessimistic $800 $1,520 Most likely 1,680 1,680 Optimistic 2,410 1,790\fSoft drinks Snack foods Initial investment (CFo) $5, 100 $5, 100 Outcome Annual cash inflows (CF ) Pessimistic $460 $410 Most likely 700 700 Optimistic 1,040 1, 170NPVS Outcome Pessimistic Most likely Optimistic