Cash Flow and Evaluation of Risk
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Possible outcomes for three investment alternatives and their probabilities of occurrence are given below.
Alternative 1
Outcomes Probability
Failure 50 .2
Acceptable 80 .4
Successful 120 .4
Alternative 2
Outcomes Probalbilty
Failure 90 .3
Acceptable 160 .5
Successful 200 .2
Alternative 3
Outcomes Probalbilty
Failure 80 .4
Acceptable 200 .5
Successful 400 .1
Rank the three alternatives in term of risk ( compute the coefficient of variation)
Assume a corporation has earnings before depreciation and taxes of # of $90,000, depreciation of $40,000, and that it is ina a 30% it is in a
30 per cent tax bracket. Compute its cash flow using the formula below:
Earnings before depreciation and Taxes (EBDIT) $90,000
Depreciation $40,000
Earnings before taxes $130,000
Taxes @ 30%
Earnings after taxes
Depreciation
Cash Flow
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Cash Flow and Evaluation of Risk are investigated. The solution is detailed and well presented.
Education
- BA, Ain Shams University, Cairo Egypt
- MBA, California State University, Sacramento
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