Question: Suppose that for a certain potential investment project, the optimistic, most likely, and pessimistic estimates are shown in the accompanying table. (Section 11.4) SHOW YOUR

Suppose that for a certain potential investment project, the optimistic, most likely, and pessimistic estimates are shown in the accompanying table. (Section 11.4) SHOW YOUR WORK

Optimistic

Most Likely

Pessimistic

Capital Investment

-$90,000

-$100,000

-$120,000

Useful life

12 years

10 years

6 years

Market value

$30,000

$20,000

$0

Net annual cash flow

$35,000

$30,000

$20,000

MARR (per year)

10%

10%

10%

It is thought that the most critical factors are useful life and net annual cash flow. Develop a table showing the net AW for all combinations of estimates for these two factors, assuming all other factors to be at theirpessimestic values.

A)

Net Annual Cash Flow

O

ML

P

Useful Life

O

$21,256

$16,256

$6,256

ML

$19,984

$14,984

$4,984

P

$14,632

$9,632

-$368

B)

Net Annual Cash Flow

O

ML

P

Useful Life

O

$23,192

$18,192

$8,192

ML

$22,238

$17,238

$7,238

P

$18,224

$13,224

$3,224

C)

Net Annual Cash Flow

O

ML

P

Useful Life

O

$17,384

$12,384

$2,384

ML

$15,476

$10,476

$476

P

$7,448

$2,448

-$7,552

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