A Project with a 3-Year Life Has the Following Probability

question 64

Multiple Choice

A project with a 3-year life has the following probability distributions for possible end of year cash flows in each of the next three years: Using an interest rate of 8 percent, find the expected present value of these uncertain cash flows.(Hint: Find the expected cash flow in each year, then evaluate those cash flows.)

• A) R1,204.95
• B) R835.42
• C) R1,519.21
• D) R1,580.00
• E) R1,347.61

Assess the financial implications of extending credit to new customers, including the potential for increased sales and risk of default.

Evaluate the benefits and risks of switching from a cash-only to a credit sales policy.

Understand the impact of trade credit terms on payment amounts and timing.

Calculate the reorder point for inventory management to ensure adequate stock levels.

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