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    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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    https://brainmass.com/business/finance/cash-flow-and-evaluation-of-risk-99936

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