Please I will like an answer step by step.Thank you.Given the following sensitivity analysis, which of the following statements is true? Estimated Annual Net Cash Flow $500,000 $600,000 $700,000 Present value of annual net cash flows (× 4.487)$2,243,500 $2,692,200 $3,140,900 Present value of residual value50,000 50,000 50,000 Total present value$2,293,500 $2,742,200 $3,190,900 Amount to be invested(3,000,000)(3,000,000)(3,000,000)Net present value(706,500)(257,800)190,900 a.The investment is not justified if the annual net cash flow will be $500,000 or $600,000.b.The annual net cash flow necessary to generate a positive net present value is above $700,000.c.The total amount to be invested is $3,050,000.d.Only an annual net cash flow of $700,000 will allow for a positive residual value.

While choosing which investment should be undertaken, different techniques are used. Techniques used…

Answered: Given the following sensitivity…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 2MAD: Assume San Lucas Corporation in MAD 26-1 assigns the following probabilities to the estimated annual...

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Please I will like an answer step by step.

Thank you.

Given the following sensitivity analysis, which of the following statements is true?

	Estimated Annual Net Cash Flow
	$500,000	$600,000	$700,000
Present value of annual net cash flows (× 4.487)	$2,243,500	$2,692,200	$3,140,900
Present value of residual value	50,000	50,000	50,000
Total present value	$2,293,500	$2,742,200	$3,190,900
Amount to be invested	(3,000,000)	(3,000,000)	(3,000,000)
Net present value	(706,500)	(257,800)	190,900

a.The investment is not justified if the annual net cash flow will be $500,000 or $600,000.

b.The annual net cash flow necessary to generate a positive net present value is above $700,000.

c.The total amount to be invested is $3,050,000.

d.Only an annual net cash flow of $700,000 will allow for a positive residual value.

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