Problem $12-53($Algo$)$ Real Options and Sensitivity Analysis $[$LO $12-4,12-5]$

Refer to the XYZ Company example in the chapter and the results in Panels A and $B$ of Exhibit $12\mathrm{.}7.$ On the basis of this information,

management of the company has decided to delay the implementation of the project for $1$ year. Those managers are now interested in

knowing how sensitive this decision is with respect to the assumptions they've made regarding the basic analysis. Therefore, they

have asked you to prepare some supplementary analyses regarding Panel B of Exhibit $12\mathrm{.}7.$

Required:

Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows:

high $(21\%),$ medium $(55\%),$ and low $(24\%)?$

Holding everything else constant, what is the expected NPV of the decision if the probabilities for the three scenarios are as follows:

high $(42\%),$ medium $(34\%),$ and low $(24\%)?$

Prepare a $53$ table containing the estimated NPV of the decision to delay for each combination of the following: risk$-$free rate of

interest $(8\%,9\%,10\%)$ and weighted$-$average cost of capital $,$ and $15\%.$ For example, one cell in your table would be

the estimated NPV of the project if the risk$-$free rate of interest is $8\%$ and the weighted$-$average cost of capital is $11\%.$