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Ogden Corporation has compiled the following information on a capital expenditure proposal:

(1) The projected cash inflows are normally distributed with a mean of $36,000 and a standard deviation of $9,000.

(2) The projected cash outflows are normally distributed with a mean of $30,000 and a standard deviation of $6,000.

(3) The firm has an 11% cost of capital.

(4) The probability distributions of cash inflows and cash outflows are not expected to change over the project’s 10-year life.

a. Describe how the foregoing data can be used to develop a simulation model for finding the net present value of the project.

b. Discuss the advantages of using a simulation to evaluate the proposed project

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91391561

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