O'Reilly Ltd is considering purchasing a spinning machine which will cost $25,000.It has a five- year life and will be worthless after that.O'Reilly's cost of capital is 12%.Because of uncertainty in the economic situation the after- tax cash inflows for each of the five years are uncertain.The company has estimated expected cash flows,as shown below,for three possible economic results: worst case,most likely case and best case.Calculate the NPVs for each of the possible economic results.Is this project very risky? Range is $15,826 - (- $3,283)= $19,109 which suggests the project is quite risky.

Question

O'Reilly Ltd is considering purchasing a spinning machine which will cost $25,000.It has a five- year life and will be worthless after that.O'Reilly's cost of capital is 12%.Because of uncertainty in the economic situation the after- tax cash inflows for each of the five years are uncertain.The company has estimated expected cash flows,as shown below,for three possible economic results: worst case,most likely case and best case.Calculate the NPVs for each of the possible economic results.Is this project very risky?  Range is $15,826 - (- $3,283)= $19,109 which suggests the project is quite risky.

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The Answer of O'Reilly Ltd is considering purchasing a spinning machine which will cost $25,000.It has a five- year life and will be worthless after that.O'Reilly's cost of capital is 12%.Because of uncertainty in the economic situation the after- tax cash inflows for each of the five years are uncertain.The company has estimated expected cash flows,as shown below,for three possible economic results: worst case,most likely case and best case.Calculate the NPVs for each of the possible economic results.Is this project very risky?  Range is $15,826 - (- $3,283)= $19,109 which suggests the project is quite risky.

O'Reilly Ltd Is Considering Purchasing a Spinning Machine Which Will