Suppose That the Forecasted Price Levels Shown in the Pro

question 28

Essay

Suppose that the forecasted price levels shown in the pro forma cash flow sheet are not deterministic, but rather, are expected to fluctuate due to market forces. The prices are expected to be normally distributed in each year, with the means equal to the expected values shown in the pro forma, but with standard deviations of $5.2, $5.3, and $5.5 in years 1, 2, and 3, respectively. Enter this pro forma in an Excel worksheet, with the appropriate @RISK functions for the random prices, and simulate 1,000 iterations. What is the expected NPV now? Would you recommend investing in this project? Explain.

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Definitions:

Socialization Process

The method through which individuals learn the values, norms, and required behaviors which permit them to participate as members of an organization.

U.S. Naval Academy

A federal service academy in Annapolis, Maryland, that educates and trains officers for commissioning primarily into the United States Navy and Marine Corps.

Salute Upperclassmen

A gesture or form of respect shown towards individuals with seniority or higher rank, especially in educational and military contexts.

Organizational Socialization

The process through which new employees learn the attitudes, behaviors, and values needed to become effective organizational members.