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Risk Assessments: capital planning

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Risk Assessments
a. First Incidence $2, 000, 0000
($,000)
Year CF
A
CF
B
Total Maximum amount
0    
1  
2  
3  
WACC 
NPV $170.75 $181.68
Decision  
! "#$%&'("$#!
)!* +%
*,+ %- .'/ 
0!!"#$1* ! . %  0
'2 *     %  
 %'
' / 2  3
4 ($,000)
Year CF
A
CF
B
Total Maximum amount
0    3
1  
2  
3  
WACC 
NPV $170.75 $181.68
IRR 18% 24%
Decision 5 +  * 
! "#$%0 "#$%5'
(!*0 "#$%   0'6
*!00 !"#$1#0"#$'
/+12770'8  0 
%+,!'2* -
 0 0"#$** '
2772  7%7 *"$#%9'5(277
:*%%'( 0 *
 % +%'(0277!
"$# !!'2%2770 '
;*!%277 '

n
t
t
t
IRR
CF
0
)1(
$0 NPV

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Risk Assessments a. First Incidence $2, 000, 0000 ($,000) Year CFA CFB Total Maximum amount 0 ($1,000) ($1,000) $2,000 $2,000 1 $100 $700 2 $600 $500 3 $800 $200 WACC 10% NPV $170.75 $181.68 Decision Both projects should be accepted because the total capital requirement is equal to total capital available and NPV, for both projects > 0. (The NVP is positive) From the table above, we can see that the total capital outlay, for both projects totals $2,000,000 which is exactly the amount of capital the firm has to undertake capital projects. Since both projects give pos ...
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