Question: Sage Hill Inc. is using a discounted cash flow model. Scenario 1: Cash flows are fairly certain $230/year for 5 years Risk-adjusted discount rate is

Sage Hill Inc. is using a discounted cash flow model. Scenario

Sage Hill Inc. is using a discounted cash flow model. Scenario 1: Cash flows are fairly certain $230/year for 5 years Risk-adjusted discount rate is 8% Risk-free discount rate is 3% Scenario 2: Cash flows are uncertain 75% probability that cash flows will be $230 in 5 years 25% probability that cash flows will be $70 in 5 years Risk-adjusted discount rate is 8% Risk-free discount rate is 3% Identify which model Sage Hill 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: Sage Hill might use traditional approach model. Fair Value $ Scenario 2: Sage Hill might use expected cash flow model. Fair Value $ $

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