9-9 - Boom 0.05 30 million 8-8: Project A Project B...

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BUS173a A. Vuorikoski-Bullis 7-7: Year X 0 -1065000 1 350,000 2 350,000 3 350,000 4 350,000 5 350,000 Required Rate of Return= 14% 7-8: Expected Net Cash Flows Year Project A Project B 0 -300 -405 1 -387 134 2 -193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 0 Minicase: Expected Net Cash Flow Year Franchise L Franchise S 0 -100 -100 1 10 70 2 60 50 3 80 20 i. Year Net Cash Flows 0 ($0.80) 1 5 2 -5
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Expected Net Cash Flows Year Project S Project L 0 ($100,000) ($100,000) 1 60000 33500 2 60000 33500 3 - 33500 4 - 33500 Year Initial Investment and Operating Cash Flows 0 ($50,000) $5,000 1 2100 3100 2 2100 2000 3 1750 0 8-7: Economic Scenario Probability of Outcome NPV Recession 0.05 ($70 million) Below Average 0.2 (25 million) Average 0.5 12 million Above Average 0.2 20 million
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Unformatted text preview: Boom 0.05 30 million 8-8: Project A Project B Profitability Net Cash Flow Profitability 0.2 $6,000 0.2 0.6 6750 0.6 0.2 7500 0.2 8-9: Probability Value Random Numbers Development Costs 0.2 $2,000,000 00-29 0.3 4000000 30-69 0.2 6000000 70-99 Project Life 0.2 3 years 00-19 0.6 8 years 20-79 0.2 13 years 80-99 Sales in Units 0.2 100 00-19 0.6 200 20-79 0.2 300 80-99 Sales Price 0.1 $13,500 00-09 0.8 13500 10--89 0.1 14000 90-99 Cost per unit (excluding 0.3 $5,000 00-29 0.4 6000 30-69 0.3 7000 70-99 Net Cash Flow $0 6750 18000 rs...
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This note was uploaded on 09/08/2010 for the course BUS 173A at San Jose State University .

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9-9 - Boom 0.05 30 million 8-8: Project A Project B...

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