Metlock Enterprises is using a discounted cash flow model. Identify which model Metlock might use to estimate the discounted fair

value under each scenario, and calculate the fair value using the present value tables:

Scenario $1$: Cash flows are fairly certain

$$\frac{260}{?}$ year for $5$ years

Risk$-$adjusted discount rate is $5\%$

Risk$-$free discount rate is $2\%$

Scenario $2$: Cash flows are uncertain

$75\%$ probability that cash flows will be $$260$ in $5$ years

$25\%$ probability that cash flows will be $$120$ in $5$ years

Risk$-$adjusted discount rate is $5\%$

Risk$-$free discount rate is $2\%$

$($For calculation purposes, use $5$ decimal places as displayed in the factor table provided. Round final answers to $2$ decimal places, e$.$g$.5,275\mathrm{.}25.)$

Click here to view the factor table PRESENT VALUE OF $1.$

Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF $1.$

Scenario $1$:

Metlock might use

traditional approach

model.

Fair value

$

Scenario $2$:

Metlock might use

model.

Fair value