End of Year Mean Net Cash Flow Standard Deviation of Cash Flow -$800,000 $250,000 1 $1,000,000 $450,000 $1,000,000 $600,000

Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter13: Probability And Calculus
Section13.3: Special Probability Density Functions
Problem 36E
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A proposed project has the following cash flow estimates.Assuming statistically independent cash flows, a normally distributed net present value, and a minimum attractive rate of return of 15%, 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 negative. c. the probability that the net present value is greater than $1,000,000. 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 negative.

End of Year Mean Net Cash Flow Standard Deviation of Cash Flow
-$800,000
$250,000
1
$1,000,000
$450,000
$1,000,000
$600,000
Transcribed Image Text:End of Year Mean Net Cash Flow Standard Deviation of Cash Flow -$800,000 $250,000 1 $1,000,000 $450,000 $1,000,000 $600,000
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ISBN:
9780321964038
Author:
GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:
Pearson Addison Wesley,