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- May 12, 2020 at 1:27 pm
in model answer
(A)Conclusion
The revenues from the project appear to be uncertain and the realisable value at the end of the project may be optimistic. It would be useful to have an indication of the range of outcomes and an idea of the probability that the project will have a negative APV.Question )The revenues from the project appear to be uncertain( because of a negative APV??), the realisable value at the end of the project may be optimistic( indicating the realiable value of investment??).
3. what is an indication of the range of outcomes?
Thank you very much.
May 12, 2020 at 2:14 pmThe first line of the question underneath ‘details of investment’ says that the revenues are uncertain. If the were a lot lower than the estimates then the APV could be negative and it would be useful to know how much higher or lower the revenues might be (i.e. the range of outcomes) and therefore the probability of the APV being negative.
The calculations have been based on a realisable value of $13.5M. It might be a lot lower than this.
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