Unformatted text preview: Cost Of Capital = 10% PV Of Expected CFs = $74.61 Million Expected NPV = $74.61  $70 = $4.61 Million Alternatively, one could calculate the NPV of each scenario: Demand Probability Annual Cash Flow High 30% $45 Average 40% $30 Low 30% $15 Find NPV of each scenario: PV High: N=3 I=10 PV=? PMT=45 FV=0 PV= 111.91 NPV High = $111.91  $70 = $41.91 Million. PV Average: N=3 I=10 PV=? PMT=30 FV=0 PV= 74.61 NPV Average = $74.61  $70 = $4.71 Million. PV Low: N=3 I=10 PV=? PMT=15 FV=0 PV= 37.30 NPV Low = $37.30  $70 = $32.70 Million. Find Expected NPV: E(NPV)=.3($41.91)+.4($4.61)+.3($32.70) E(PV)= $4.61....
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 Spring '08
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 Cost Of Capital, $15, $32.70, $37.30, PV High

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