7. A project with a 3-year life has the following probability distributions for possible end-of year cash flows in each of the next three years:Year 2Year 1Prob Cash Flow Prob Cash Flow Prob Cash Flow0.30 $300 0.15 s100 0.25 S2000.40 500 0.35 200 0.75 8000.30 700 0.35 600Year 30.15 900Using an interest rate of 8 percent, find the expected present value of theseuncertain cash flows. (Hint: Find the expected cash flow in each year, thenevaluate those cash flows.)a.$1,204.95b.$ 835.42c.$1,519.21d.$1,580.00e$1,347.61

7. A project with a 3-year life has the following probability distributions for possible end- of year cash flows in each of the next three years: Year 1 Prob Cash Flow Prob Cash Flow Prob Cash Flow 0.30 $300 0.40 500 0.35 200 0.30 700 0.35 600 Year 2 Year 3 0.15 s100 0.25 Sz00 0.75 800 0.15 900 Using an interest rate of 8 percent, find the expected present value of these uncertain cash flows. (Hint: Find the expected cash flow in each year, then evaluate those cash flows.) a.$1,204.95 b.$ 835.42 c.$1,519.21 d.$1,580.00 e$1,347.61

7. A project with a 3-year life has the following probability distributions for possible end- of year cash flows in each of the next three years: Year 1 Prob Cash Flow Prob Cash Flow Prob Cash Flow 0.30 $300 0.40 500 0.35 200 0.30 700 0.35 600 Year 2 Year 3 0.15 s100 0.25 Sz00 0.75 800 0.15 900 Using an interest rate of 8 percent, find the expected present value of these uncertain cash flows. (Hint: Find the expected cash flow in each year, then evaluate those cash flows.) a.$1,204.95 b.$ 835.42 c.$1,519.21 d.$1,580.00 e$1,347.61

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 22E

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