Hi Shilpa,
Please find below:-
'000s
Initial Investment $ 6,000
Cash inflows at the end of Year 1 -
Probability Cash Inflow Amount
Scenario 1 30% 2,000 600
S2 40% 4,000 1,600
S3 30% 6,000 1,800
Total cash inflow at the end of Year 1 : 600+1600+1800 = 4000
NPV = 4000 x .909 = 3,636
Cash inflows at the end of Year 1 -
Probability Cash Inflow Amount
S1 30%*50% 0 0
30%*50% 4,000 600
S2 40 %*25% 6,400 640
40%*75% 3,200 960
S3 30 %*40% 6,875 825
30%*60% 5,000 900
Total cash inflow at the end of Year 2 : 600+640+960+825+900 = 3925
NPV = 4000 x .826 = 3242.05
Project's NPV: Initial Investment - Discounted Cashflows for Yr1 & Yr2
= (6000)+3636+3242.05 = 878.5
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Mary Mitzel Claire Susa
Accountant
Dubai
United Arab Emirates
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Original Message:
Sent: 02-22-2020 04:01 AM
From: Shilpa Sinha
Subject: Cash flow analysis
Dear Members
Please help me to explain the working of below question
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Shilpa Sinha
Analyst
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