Question

Corbin has determined three cash flow options for products at his store. The first is $680 and the second is $450. The chances of the future cash flow being $680 are 40%, the chances of it being $520 are 40%, and the chances of it being $450 are 20%. What is this an example of?

Answer 1

Answer:

probability assessment

Explanation:

A probability assessment refers to determining the likelihood of an event occurring. This is generally done to estimate the potential risks of an investment since cash flows are basic for calculating a project's NPV, IRR and payback period.

In this case, the estimated cash flow = ($680 x 40%) + ($520 x 40%) + ($450 x 20%) = $571.60