What are the steps in calculating the good result and poor result NPVs. I am unsure of how to use this in an excel spreadsheet. The examples are below:

Scenario #1: Use 10% cost of capital in computations and compute the good result and poor result NPVs. Calculate the real option NPV using the results computed.

Scenario #2: Use a risk adjusted cost of capital against the good scenario above which can adjust for risk variables such as; experience with the focus of the project, chance of change to estimated variables (revenue, costs, timing, etc) and/or the potential change in cost of capital in the future.

Compute the new NPV using a variety of risk adjusted discount rates. Justify your computations in determining how you have adjusted discount rates for risk. Discuss the outcomes from your adjustments and how you would apply them in capital expenditure justification.

Answer rating: 100% (QA)

Calculating Good Result and Poor Result NPVs To calculate the good result and poor result NPVs you need to follow these steps 1 Determine the projects cash flows Calculate the expected cash inflows an... View the full answer