Question: please help me solve this! thank you Excel Online Structured Activity: Investment Timing Option All American Telephones Inc. Is considering the production of a new


Excel Online Structured Activity: Investment Timing Option All American Telephones Inc. Is considering the production of a new cell phone. The project will require an investment of $15 million. If the phone is well received, the project will produce cash flows of $9 million a year for 3 years, but if the market does not like the product, the cash flows will be only $2 million per year. There is a 50% probability of both good and bad market conditions. All American can delay the project a year while it conducts a test to determine whether demand will be strong or weak. The delay will not affect the dollar amounts involved for the project's investment or its cash flows-only their timing. Because of the anticipated shifts in technology, the 1 -year delay means that cash flows will continue only 2 years after the initial investment is made. All American's WACC is 9%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. 1 Investment Timing Option 3 WACC 9,00% Project Done Todar. InvestmentcostCFsirproductwellroceivedCFsifproductpoorlyreceivedProbabilityofgoodmarketcoenditionsProbabalyofbadmarketcondibionsProjectlifo(inyoars)$15,000,000$9,000,000$2,000,00050,00%50,00%3 Wat a Year To Do Project: 14 Imvestment cost 15 CFs it product weil received 16 CFs it product poorly recelved 17 Probability of good market con 18 Probiability of bad market cond 19 Project life (in yoars) 20 21 NPV of Doing Project Today 0 1 3 Good Marher Conditions: Probability Investment cost Cash inflows Formulas Net present value, good market T. TN N/A Bad Market Conditions: Probabilby Invesiment cost Cash inflows Net present value, bad market Expected NPV of doing project today NPV of Waiting 1 Year to Do Project Good Markot Conditions: Probability. investment cost Cash inflows \begin{tabular}{rrrr|} 0 & 1 & 2 & 3 \\ \hline 50,00% & & & \\ \hline & $15,000,000 & & \\ & & $9,000,000 & $9,000,000 \end{tabular} Net present value, good market Sad Marhet Conditions:' Probability 50.00% NPV of Doing Projoct Today 0 1 2 3 Good Market Conditions. Probability Investmont cost Cash intlows Formulas Net present value; good market Bad Market Conditions: Probability Investment cost $15,000,000 Cash inflows Net present value, bad market Expected NPV of doing project today NPV of Waiting 1 Year to Do Project \begin{tabular}{llll} 0 & 1 & 2 & 3 \\ \hline \end{tabular} Good Market Conditions: Probability Investment cost Cash infiows Net present value, good market Bad Market Conditions: Probability Investment cost Cash inflows Net present value, bad market Expected NPV today of waiting 1 year What action is recommended? Excel Online Structured Activity: Investment Timing Option All American Telephones Inc. Is considering the production of a new cell phone. The project will require an investment of $15 million. If the phone is well received, the project will produce cash flows of $9 million a year for 3 years, but if the market does not like the product, the cash flows will be only $2 million per year. There is a 50% probability of both good and bad market conditions. All American can delay the project a year while it conducts a test to determine whether demand will be strong or weak. The delay will not affect the dollar amounts involved for the project's investment or its cash flows-only their timing. Because of the anticipated shifts in technology, the 1 -year delay means that cash flows will continue only 2 years after the initial investment is made. All American's WACC is 9%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. 1 Investment Timing Option 3 WACC 9,00% Project Done Todar. InvestmentcostCFsirproductwellroceivedCFsifproductpoorlyreceivedProbabilityofgoodmarketcoenditionsProbabalyofbadmarketcondibionsProjectlifo(inyoars)$15,000,000$9,000,000$2,000,00050,00%50,00%3 Wat a Year To Do Project: 14 Imvestment cost 15 CFs it product weil received 16 CFs it product poorly recelved 17 Probability of good market con 18 Probiability of bad market cond 19 Project life (in yoars) 20 21 NPV of Doing Project Today 0 1 3 Good Marher Conditions: Probability Investment cost Cash inflows Formulas Net present value, good market T. TN N/A Bad Market Conditions: Probabilby Invesiment cost Cash inflows Net present value, bad market Expected NPV of doing project today NPV of Waiting 1 Year to Do Project Good Markot Conditions: Probability. investment cost Cash inflows \begin{tabular}{rrrr|} 0 & 1 & 2 & 3 \\ \hline 50,00% & & & \\ \hline & $15,000,000 & & \\ & & $9,000,000 & $9,000,000 \end{tabular} Net present value, good market Sad Marhet Conditions:' Probability 50.00% NPV of Doing Projoct Today 0 1 2 3 Good Market Conditions. Probability Investmont cost Cash intlows Formulas Net present value; good market Bad Market Conditions: Probability Investment cost $15,000,000 Cash inflows Net present value, bad market Expected NPV of doing project today NPV of Waiting 1 Year to Do Project \begin{tabular}{llll} 0 & 1 & 2 & 3 \\ \hline \end{tabular} Good Market Conditions: Probability Investment cost Cash infiows Net present value, good market Bad Market Conditions: Probability Investment cost Cash inflows Net present value, bad market Expected NPV today of waiting 1 year What action is recommended
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