Jerome Bush used a discounted cash flow method and calculated firm values for Amazonia Forest Products (e.g., NPV of the free cash flows). In an effort to better qualify his assessment of the firm’s valuation, he plans to use scenario analysis techniques that he learned about in his MBA program. For the base or the most likely case, he found the NPV equaled $32,590. For the optimistic case, using more liberal assumptions, his NPV equaled $65,180. He projected a 30% probability for each of these possibilities. He also thought there was a 40% chance the firm would be worthless (NPV=0). Given these scenario specific values and probabilities, what would his scenario weighted valuation of Amazonia be?
Jerome Bush used a discounted cash flow method and calculated firm values for Amazonia Forest Products (e.g., NPV of the
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