End of Year Mean Net Cash Flow Standard Deviation of Cash Flow -$32,000 $1,000 1 $4,000 $2,000 2 $8,000 $3,000 3 $12,000 $5,000 4 $12,000 $6,000 $12,000 $7,000
End of Year Mean Net Cash Flow Standard Deviation of Cash Flow -$32,000 $1,000 1 $4,000 $2,000 2 $8,000 $3,000 3 $12,000 $5,000 4 $12,000 $6,000 $12,000 $7,000
End of Year Mean Net Cash Flow Standard Deviation of Cash Flow -$32,000 $1,000 1 $4,000 $2,000 2 $8,000 $3,000 3 $12,000 $5,000 4 $12,000 $6,000 $12,000 $7,000
A proposed project has the following cash flow estimates. Assuming independent cash flows, a normally distributed net present value, and a minimum attractive rate of return of 18%, determine the following. For the following questions, employ an analytical solution: a. The mean and standard deviation of net present value. b. The probability that the net present value is positive. c. The probability that the net present value is greater than $5,000. Assume the initial investment and annual receipts are normally distributed. d. Using a Monte Carlo simulation with 10,000 iterations, estimate the probability that the present worth is positive and estimate the probability that the present worth is greater than $5,000.
Transcribed Image Text:End of Year Mean Net Cash Flow Standard Deviation of Cash Flow
-$32,000
$1,000
1
$4,000
$2,000
2
$8,000
$3,000
3
$12,000
$5,000
4
$12,000
$6,000
$12,000
$7,000
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