6. A project has an initial investment of 100. You have come up with the following estimates of the project’s cash flows (there are no taxes): Most Likely Pessimistic 15 10. Optimistic 25 5 Revenues го- Costs Suppose the cash flows are perpetuities and the cost of capital is 10 percent. Conduct a sensitivity analysis of the project’s NPV to variations in revenues. (Answers appear in order: [Pessimistic, Most Likely, Optimistic].)e A.-30, +20, +70. B. -100, -50, +80. C. -50, +50, +70. Is

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EXPERT ANSWER

By assuming costs to be always 8 due to most likely
NPV of pessimistic scenario = (15-8)/10% – 100 = -30
NPV of most likely scenario = (20-8)/10% – 100 = 20
NPV of pessimistic scenario = (25-8)/10% – 100 = 70

Option A is correct option