Table 11.6
A corporation is assessing the risk of two capital budgeting proposals.The financial analysts have developed pessimistic,most likely,and optimistic estimates of the annual cash inflows which are given in the following table.The firm's cost of capital is 10 percent.
-The expected net present value of Project A if the outcomes are equally probable and the project has five-year life is ________.(See Table 11.6)

Question

Table 11.6
A corporation is assessing the risk of two capital budgeting proposals.The financial analysts have developed pessimistic,most likely,and optimistic estimates of the annual cash inflows which are given in the following table.The firm's cost of capital is 10 percent. 
-The expected net present value of Project A if the outcomes are equally probable and the project has five-year life is ________.(See Table 11.6)

Quizplus · Accepted Answer

The expected net present value is calculated by averaging the possible outcomes, assuming they are equally probable.

Table 11.6 A Corporation Is Assessing the Risk of Two Capital Budgeting