What is the probability that the project will be acceptable

Assignment Help Financial Management

Reference no: EM13927534

1. Use the sensitivity-analysis calculator maintained by CCH to perform a cash flow sensitivity-analysis of a firm or project (https://www.toolkit.cch.com/tools/cfsens_ m.asp).

2. Jeff Himm has recently been hired as a financial analyst for the Bunich Corporation. Bunich has traditionally used the payback method in conjunction with NPV as a way to assess the risk of capital investments that the firm makes. Jeff is a new MBA graduate and is eager to put to work the tools he has learned.

One project that the firm is considering has an expected NPV of $1.5 million. An analysis of the cash flows of the project suggests that the most optimistic estimate of the NPV is $4 million, and the most pessimistic estimate is a negative $1 million. By most optimistic, Jeff explains that it is a value not expected to be exceeded more than 10 percent of the time. By most pessimistic, Jeff explains that it is a value not expected to be less than more than 10 percent of the time. Cash flows are expected to be normally distributed.

a. What is the probability that this project will be acceptable?

b. What is the probability that this project will have an NPV in excess of $1 million?

Reference no: EM13927534

Questions Cloud

Define the swot analysis and porter five forces : The aim of the exercise is to define the SWOT Analysis and Porter's Five Forces that shape Robin Hood's industry strategies. Porter's Five Forces is defined as the effective competitive strategy that organizations put in place as an offensive or d..

Intangibility of services when positioning itself : Which of the following will most help service providers overcome the limitation of intangibility of services when positioning itself?

Essentials of managerial communication : he class that I feel I am taking the most from in my studies thus far has been Essentials of Managerial Communication. The course has taught me many valuable forms of communication. Communication is more than just speaking, but it is writing and l..

Write the code for the triggers : Write the code for the following triggers following the style shown in the text. a. When adding a customer, add the customer's balance times the sales rep's commission rate to the commission for the corresponding sales rep.

What is the probability that the project will be acceptable : What is the probability that this project will be acceptable? What is the probability that this project will have an NPV in excess of $1 million?

Describe the steps of the scientific method earl utilized : How would the scientific method help Earl create an experiment to determine which food sources made people sick

Is this an attractive industry to invest in : Identify how each force impacts the trucking industry and Werner (www.werner.com) in particular. Is this an attractive industry to invest in?

Costs of all our managers and employees : You should be concerned about the woes of all the employees on the recent hike in gas prices. The company has taken that issue sensitively upon speculation that it will not only increase the cost of operation but it will also increase the transpor..

Construct simulation to portray macrophage chasing bacteria : Construct simulation in MATLAB to portray a macrophage chasing a bacteria as it diffuses away and ultimately catching it if:

User Account

All Pages