Quantitative Risk Simulation with Crystal Ball

Before working on this assignment, make sure to complete the following:

1. Download and install Crystal Ball on your computer. Instructions to download Crystal Ball is given here.

2. Practice Monte Carlo Simulation with Ceramic Sciences Revisited example on page 271 of the textbook. See important instructions here.

Consider a project with an initial cost of $75,000 but will result in cash inflows of $20,000, $25,000, $30,000, and $50,000 in each of the next 4 years. A discounted cash flow calculation to determine the NPV of the project, assuming a required rate of return of 0.2 is calculated.

Data: Download this table Download tableto run the Crystal Ball simulation.

A. Assume that the inflows are uncertain but normally distributed with standard deviations of $1,000, $1,500, $2,000, and $3,500, respectively. Find the mean forecast NPV using Crystal Ball. Show screenshots of the frequency distribution on a MS Word file. [10 Points]

B. What is the probability the actual NPV will be positive? Show screenshots of the frequency distribution. [10 Points]

Files to submit:

1. MS Word file with screenshots

2. Excel workbook of your solution