A new project will require $X in investment today and is expected to provide a net cash outflow of $1000(Y) for
the next two years where: (a) Determine and simplify the NPV equation assuming the risk-free rate is 6%.
(b) Given the following sequence of uniform random deviates, calculate the first iteration for this NPV
equation. Note that the selling price, once determined at period 1 will be the same value will be assumed in
period 2. In statistical term, selling prices are perfectly positively correlated each other. Also assume that X and
Y are statistically independent.

Question

A new project will require $X in investment today and is expected to provide a net cash outflow of $1000(Y) for
the next two years where:  (a) Determine and simplify the NPV equation assuming the risk-free rate is 6%.
(b) Given the following sequence of uniform random deviates, calculate the first iteration for this NPV
equation. Note that the selling price, once determined at period 1 will be the same value will be assumed in
period 2. In statistical term, selling prices are perfectly positively correlated each other. Also assume that X and
Y are statistically independent.

Quizplus · Accepted Answer

The Answer of A new project will require $X in investment today and is expected to provide a net cash outflow of $1000(Y) for
the next two years where:  (a) Determine and simplify the NPV equation assuming the risk-free rate is 6%.
(b) Given the following sequence of uniform random deviates, calculate the first iteration for this NPV
equation. Note that the selling price, once determined at period 1 will be the same value will be assumed in
period 2. In statistical term, selling prices are perfectly positively correlated each other. Also assume that X and
Y are statistically independent.

A New Project Will Require $X in Investment Today and Is