Teal Mountain Inc. is using a discounted cash flow model.

Scenario 1:Cash flows are fairly certainScenario 2:Cash flows are uncertain$140/year for 5 years75% probability that cash flows will be $140 in 5 years

Risk-adjusted discount rate is 8%25% probability that cash flows will be $120 in 5 years

Risk-free discount rate is 2%Risk-adjusted discount rate is 8%

Risk-free discount rate is 2%

Identify which model Teal Mountain might use to estimate the discounted fair value under each scenario, and calculate the fair value.(For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25.)

Click here to view the factor table PRESENT VALUE OF 1.

Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.

Scenario 1:

Teal Mountain might use

expected cash flow

traditional approach

model.Fair Value$

Scenario 2:

Teal Mountain might use

expected cash flow

traditional approach

model.Fair Value$