Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1) The mulligan machine works company is considering the routine investment opportunity that initially costs $450,000 and is expected to last for just 2 years. MMWC believes that there is 60% probability which demand will be high for 1st year of operation resulting in after tax cash flows of $400,000 for year one. If demand is low from the 1st year (40% probability) then MMWC expects cash flows of $175,000 for year one. Additional, there is 70% probability which demand will remain the same for year two. Or we can say, if demand is high (low) in year one, there is 70% probability it will remain high (low) in year two and 30% probability that it will be low (high) in year two. At end of year one, MMWC has option to invest the addition $200,000 to expand this project for year two. If expansion option is taken, high demand will effect in cash flows of $700,000 and low demand will result in cash flows of $400,000 in year two. If expansion option is not taken, then high demand cash flows will remain at $400,000. And low demand cash flows will stay at $175,000 in year two. The opportunity cost of capital for MMWC is 14%.

1) Sketch a decision tree for this problem.

2) What is the NPV for project under active management?

Requirements
Min Pages: 1

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914518

Have any Question? 


Related Questions in Basic Finance

Mirr rak corp is evaluating a project with the following

MIRR RAK Corp. is evaluating a project with the following cash flows: Year 0: -41,000, Year 1: 15,700, Year 2: 19,400, Year 3: 24,300, Year 4: 18,100 and Year 5: -9,400. The company uses an interest rate of 10 percent on ...

1 illustrate a common trade-off that occurs between the

1. Illustrate a common trade-off that occurs between the work areas of logistics. 2. Discuss and elaborate on the following statement: "The selection of a superior location network can create substantial competitive adva ...

1 from a tax perspective what primary requirements in a

1. From a tax perspective, what primary requirements in a lease transaction must be met in order for the IRS to consider the transaction a genuine lease? Why is a favorable IRS ruling regarding the tax status of a lease ...

A model of a harbor is made on the length ratio of 3601

A model of a harbor is made on the length ratio of 360:1. Storm waves of 2 m amplitude and 8 m/s velocity occur on the breakwater of the prototype harbor. Significant variables are the length scale, velocity, and g, the ...

What primary factors determine the number of load cycles

What primary factors determine the number of load cycles required to break a bolt subject to fatigue loading? Describe the appearance of the break surface of a bolt which has failed in fatigue ? Where on a bolt are you m ...

Consider a 0 5 super senior tranche and a index cds spread

Consider a [0%, 5%] super senior tranche, and a index CDS spread of 400 bps for 5 years maturity assuming 0% recovery and 0% interest rates. We'll be pricing this tranche using one factor gaussian copula. a) What is the ...

Listed below is a list of how long it takes for bands on

Listed below is a list of how long it takes for bands on stage to complete their first song (in seconds). 538 312 327 309 344 313 318 315 325 331 312 314 What is the mean time it takes for bands on stage to complete thei ...

Assignment capital investments in emerging marketsuse the

Assignment: Capital Investments in Emerging Markets Use the Internet and/or Strayer Learning Resource Center to research a global manufacturing company of your choice. Review the current plans that your selected company ...

Katherine wishes to endow a professorship in honor of her

Katherine wishes to endow a professorship in honor of her beloved mycology professor. The University's development office has prepared a proposal for her review, to wit, "The Agnew Chair in Fungus Studies," which will co ...

1 how is hr at pliva aligned with the corporate strategy2

1. How is HR at Pliva aligned with the corporate strategy? 2. How does the bonus formula at Pliva support the balanced scorecard efforts? 3. What is the impact of the Barr acquisition of Pliva on the strategic planning a ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen