Question: please use excel No simulation required, rest other is important 3. Your small business is considering upgrading your computers. The cost (in year () is

please use excel
please use excel No simulation required, rest other is important 3. Your
No simulation required, rest other is important

3. Your small business is considering upgrading your computers. The cost (in year () is $6000. The expected increase in sales in $2000 each year for the next 4 years (and after that). All cash flows occur at the end of the year. Assume a discount rate of 8% (5 points) a Is upgrading the computers a worthwhile investment? Why or why not? (0.5 points). Now assume that the computer upgrade is associated with 3 possible outcomes that are all equally likely (each year): 1) sales increase by $4000, 2) sales increase by $2000, or 3) sales increase by $0. b. What is the expected value of the sales increase? (0.5 point) c. What is the standard deviation of the sales increase (0.5 point) d. Conduct a Monte Carlo simulation with 1000 draws. What is the average NPV and the standard deviation of the NPV? (2 points) e. What percent of the time does the MBA yields a negative NPV? (0.5 point) f. Plot the frequency distribution (with % of times as your Y-axis, and NPV as your X- axis). (1 points)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!