Unformatted text preview: = 8, to solve for IRR = 15.29%. Expected IRR = 15.29% ≈ 15.3%. Assuming complete independence between the distributions, and normality, it would be possible to derive σ IRR statistically. Alternatively, we could employ simulation to develop a distribution of IRRs, hence σ IRR . There is no easy way to get σ IRR . b. Using a financial calculator, input the following: CF = -4000000, CF 1 = 900000, N j = 8, and I = 15 to solve for NPV = $38,589.36. Again, there is no easy way to estimate σ NPV . c. (1) a. Calculate developmental costs. The 44 random number value, coming between 30 and 70, indicates that the costs for this run should be taken to be $4 million. b. Calculate the project life. The 17, being less than 20, indicates that a 3-year life should be used. Answers and Solutions: 12 - 10...
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- Spring '08
- Probability theory, probability density function, IRRs, symmetric probability distributions