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Now assume Audrey estimates that the residual valu...

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Now assume Audrey estimates that the residual value could be as low as $0 or as high as $510,000. Further, she subjectively assigns a probability of occurrence of 0.25 to the extreme values and 0.50 to the base case value, $255,000. Describe how Audrey's estimates could be incorporated into the analysis. If you are using the spreadsheet model, calculate Agro-Chem's net advantage to leasing (NAL) at each residual value. What is the expected NAL? (For this analysis, assume a 7.2 percent after-tax discount rate on all cash flows.)

 

Paper#7115 | Written in 18-Jul-2015

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