Suppose that we are considering the investment project which requires an initial investment outflow of $345. Given a resulting cash flows of $600, $300 and -$150 in year 1. In year 2, each branch will...


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Suppose that we are considering the investment project which requires an initial investment<br>outflow of $345. Given a resulting cash flows of $600, $300 and -$150 in year 1. In year 2, each branch<br>will produce three possible outcomes as shown in the table below. The risk-free rate of return is 7.5%.<br>Calculate the Expected Net Present Value (NPV), Variance and Standard Deviation of this investment<br>project by using probability tree approach.<br>YEAR 1<br>YEAR 2<br>Initial<br>Net Cash<br>Conditional<br>Net Cash Flow<br>Branch<br>Probability<br>P(1)<br>Flow<br>Probability P<br>(2/1)<br>0.20<br>$700<br>1<br>0.30<br>$600<br>0.40<br>$200<br>$500<br>0.40<br>0.30<br>-$100<br>4<br>0.50<br>$300<br>0.30<br>$300<br>0.40<br>$500<br>0.30<br>-$400<br>0.20<br>-$150<br>0.20<br>-$100<br>0.50<br>$200<br>6.<br>23<br>647989<br>

Extracted text: Suppose that we are considering the investment project which requires an initial investment outflow of $345. Given a resulting cash flows of $600, $300 and -$150 in year 1. In year 2, each branch will produce three possible outcomes as shown in the table below. The risk-free rate of return is 7.5%. Calculate the Expected Net Present Value (NPV), Variance and Standard Deviation of this investment project by using probability tree approach. YEAR 1 YEAR 2 Initial Net Cash Conditional Net Cash Flow Branch Probability P(1) Flow Probability P (2/1) 0.20 $700 1 0.30 $600 0.40 $200 $500 0.40 0.30 -$100 4 0.50 $300 0.30 $300 0.40 $500 0.30 -$400 0.20 -$150 0.20 -$100 0.50 $200 6. 23 647989

Jun 11, 2022
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