Probability that project will be acceptable investment

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Worrall's Wahoo Novelties is considering a new venture that would produce golden Wahoo commemorative coins. Worrall has estimated that the net investment required will be $15,000, including a $2,000 investment in net working capital. The project is expected to have a 4-year life.

Annual net operating cash flows are estimated to be $10,000 in year 1, $8,000 in year 2, $7,000 in year 3, and $6,000 in year 4. The cost of capital is 12 percent. Worrall's marginal tax rate is 40 percent. The standard deviation of the project's net present value is $3,000.

What is the probability that this project will be an acceptable investment?

Reference no: EM131337201

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