Suppose you have a project that will cost $800,000 last for ten years. The cash flows foreach year have an expected value of $175,000 with a standard deviation of $20,000. Thecost of capital is 10%. Use a Monte Carlo simulation with 1,000 replications to evaluatethis project using the NPV and IRR approaches.

Suppose you have a project that will cost $800,000 last for ten years. The cash flows foreach year have an expected value of $175,000 with a standard deviation of $20,000. Thecost of capital is 10%. Use a Monte Carlo simulation with 1,000 replications to evaluatethis project using the NPV and IRR approaches.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 1P: A project has an initial cost of 40,000, expected net cash inflows of 9,000 per year for 7 years,...

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Suppose you have a project that will cost $800,000 last for ten years. The cash flows for each year have an expected value of $175,000 with a standard deviation of $20,000. The cost of capital is 10%. Use a Monte Carlo simulation with 1,000 replications to evaluate this project using the NPV and IRR approaches. USE EXCEL AND EXPLAIN EACH STEP
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