Basic Sensitivity Analysis for Fishman Paints
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Fishman 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 attached table.
a. determine the range of annual cash inflows for each of the two projects.
b. assume that the firm's costs of capital is 10% and that both projects have 20 yr lives. Construct a table similar to this for the NPV's for each project. Include the range of NPV's for each project
c. do parts a and b provide consistent views of the two projects? Explain
d. which project do you recommend? why?
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Solution Summary
The range of annual cash inflows for each of the two projects in Fishman Paints is analyzed. The two projects are mutually exclusive.
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