Suppose you have a project that will cost $800,000 last for ten years. The cash flows for each year have an expected value of $175,000 with a standard deviation of $20,000. The cost of capital is 10%. Use a Monte Carlo simulation with 1,000 replications to evaluate this project using the NPV and IRR approaches. USE EXCEL AND EXPLAIN EACH STEP

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 12P
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Suppose you have a project that will cost $800,000 last
for ten years. The cash flows for each year have an
expected value of $175,000 with a standard deviation
of $20,000. The cost of capital is 10%. Use a Monte
Carlo simulation with 1,000 replications to evaluate this
project using the NPV and IRR approaches. USE EXCEL
AND EXPLAIN EACH STEP
Transcribed Image Text:Suppose you have a project that will cost $800,000 last for ten years. The cash flows for each year have an expected value of $175,000 with a standard deviation of $20,000. The cost of capital is 10%. Use a Monte Carlo simulation with 1,000 replications to evaluate this project using the NPV and IRR approaches. USE EXCEL AND EXPLAIN EACH STEP
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