Developed cash flow estimates as pessimistic

Assignment Help Financial Accounting

Reference no: EM131216791

For two mutually exclusive investments, the management of the company has developed cash flow estimates as pessimistic, most likely, and optimistic.

A B

Investment 5,500 5,500

Pessimistic 200 700

Most likely 800 800

Optimistic 1,400 900

Both projects have a life of 15 years. Cost of capital = 14 percent. Which project is more risky? Recalculate NPV if the probabilities of the three situations are 30 percent, 50 percent and 20 percent respectively.

Reference no: EM131216791

Questions Cloud

Record-keeping for members pledges and contributions : You have been asked by the board of trustees of a local church to review its accounting procedures. As part of this review you have prepared the following comments relating to the collections made at weekly services and record keeping for members' pl..

Appropriate course of action regarding the illegal act : Enormo Corporation is a large multinational audit client of your CPA firm. One of Enormo' s subsidiaries, Ultro, Ltd., is a successful electronics assembly company that operates in a small Caribbean country. Discuss the implications of this illegal ..

Calibrating the machine for operation : Josh paid his brother, a mechanic, $5,300 to install a robotic machine for Josh’s business. The amount he paid to his brother is comparable to what he would have paid to an unrelated party to do the same work. Once the installation was completed by h..

Flexible budget cost formula for indirect materials : Muntjac Corporation's flexible budget cost formula for indirect materials, a variable cost, is $1.25 per unit of output. Assume that actual units produced equals standard units produced. If the company's performance report for last month shows a $500..

Developed cash flow estimates as pessimistic : For two mutually exclusive investments, the management of the company has developed cash flow estimates as pessimistic, most likely, and optimistic. Both projects have a life of 15 years. Cost of capital = 14 percent. Which project is more risky? Rec..

How is present value related to the concept of a liability : How is present value related to the concept of a liability? Southeast Airlines Inc. awards members of its Flightline program a second ticket at half price, valid for 2 years anywhere on its flight system, when a full-price ticket is purchased. How wo..

Considering capital budgeting project : XYZ Corporation is considering a capital budgeting project that would require an initial investment of $440,000 and working capital of $32,000. The investment would generate annual cash inflows of $147,000 for the life of the project. Calculate the $..

Dividing partnership net income : Dividing Partnership Net Income Steve Jack and Chelsy Stevens formed a partnership, dividing income as follows: Annual salary allowance to Jack of $45,000. Interest of 10% on each partner's capital balance on January 1. Any remaining net income divid..

Compute the noncontrolling interest : Dell Company acquires 80% of Kemers Company for $500,000 on January 1, 2010. Kemers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each..

User Account

All Pages