associated with each project. These estimates are shown in the following table.

Question

associated with each project. These estimates are shown in the following table.

Basic scenario analysis Murdock Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm’s financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows

associated with each project. These estimates are shown in the following table.

Project A Project B Initial investment 8000 8000 Outcome Annual cash inflows Pessimistic 200 900 most likely 1000 1000 Optimistic 1800 1100

Explanation / Answer

Range of annual cash flow

Project A= $1800-$200=$1600

Project B=$1100-$900=$200

Thanks

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