I need homework help with 26.1 and 26.6 please complete using excel and use the tool kit and template. Please note the homework changes, show formulas, one spreadsheet with separate worksheets for each problem.Page 1
Find the project's expected cash flows and NPV.
CF x Prob.
Time line of Expected CF
Salvage Value =
Risk-free rate =
Decision Tree Analysis
Future Cash Flows
Bradford Services Inc. (BSI) is considering a project that
has a cost of $10 million and an expected
years. There is a 30 percent probability of good conditions, in which case the project will provide a
of $9 million at the end of each year for 3 years.
There is a 40 percent probability of medium condit
which case the annual cash flows will be $4 million, and there is a 30 percent probability of bad con
and a cash flow of -$1 million per year. BSI uses a 12 percent cost of capital to evaluate projects like
Now suppose the BSI can abandon the project at the end of the first year by selling it for $6
million. BSI will still
receive the Year 1 cash flows, but will receive no cash flows in subsequent
Assume the salvage
value is risky and should be discounted at the WACC.
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