1.
Risk Analysis and Project Evaluation
OLEH:
Alviyanti Nawangsari [4301170109]
Gita Mutiara Ovelia [4301170300]
Rifky Yudha Mahendra [4301170175]
DIII Kebendaharaan Negara, 3-3
PKN STAN

2.
13-3 (Forecasting Cash Flow using The Expected
Value)
Rao Roofing of Stillwater, Oklahoma, is also considering the acquisition of
Simpkins Storage Company. Rao’s management team has analyzed the annual cash
flows for Simpkins and come up with these estimates for the three states of the
economy:
Scenario 1
:Recession
Scenario 2:
Normal
Scenario 3:
Expansion
Probability 30% 50% 25%
Cash flow for
each scenario
Rp (60.000) Ro170.000 Rp250.000
A rival firm, Mitchell Company is also considering a bid for Simpkins and their
estimated cash flow for Simpkins in each potential state od the economy are the
same as those of Rao. However, Mitchell’s management is much more optimizing
about the economy. They estimate the probability of recession next year at only
15%, the probability of a normal state of the economy is 65%, and the probability
of expansion at 20%
a. Based on Rao’s estimated probabilities for each state of the economy. What
should be their estimate of expected cash flows for Simpkins?
b. What should be Mitchell’s estimate of the expected cash flow for Simpkin’s
year one cash flow?
c. Which company do you think will ultimately be willing to pay the highest
price for Simpkins, all else being equal other than their outlook for the
economy?
Answer:
a. Expected cash flow untuk Perusahaan Rao Roofing :
Expected Cash Flow
Scenario 1
30% x Rp(60.000) Rp (18.000)
Expected Cash Flow
Scenario 2
50% x Rp170.000 Rp 85.000
Expected Cash Flow
Scenario 3
25% x Rp250.000 Rp 62.500
Total Expected Cash Flow Rp 129.500
b. Expected Cash Flow untuk Mitchell Company :

3.
Expected Cash Flow
Scenario 1
15% x Rp(60.000) Rp (9.000)
Expected Cash Flow
Scenario 2
65% x Rp170.000 Rp 110.500
Expected Cash Flow
Scenario 3
20% x Rp250.000 Rp 50.000
Total Expected Cash Flow Rp 151.500
c. Perusahaan Mitchell yang bersedia membayar harga tinggi untuk Simpkins.
13-4 Forecasting revenues using scenario analysis
Floating Homes, Inc., is a manufacturer of luxury pontoon and housebonts that sell
for $60,000 to $120,000. To estimate its revenues for the following year, Floating
Homes divides its boats sales into three categories based on selling price (high,
medium, and low) and estimates the number of units it expects to sell under three
different economic scenarios. These scenarios include a recession (Scenario I), a
continuation of current condition in which economy is level or unchanged (Scenario
II), and a strong economy (Scenario III). These estimates are as follows:
Scenario I:
Recession
Scenario II:
Level
Economy
Scenario III:
Strong Economy
Probability
25% 50% 25%
High-Priced Boats
Category
Unit Sales
80 400 1500
Average price per unit
$100,000 $110,000 $115,000
Medium-Priced Boats
Category
Unit Sales
160 800 3200
Average price per unit
$80,000 $90,000 $100,000

4.
Low-Priced Boats
Category
Unit sales
320 1600 6400
Average price per unit
$70,000 $70,000 $70,000
Using these estimates calculate the expected revenue for Floating Homes,Inc., for
the following year.
Answer:
To determine the expected revenue for Floating Homes, we need to calculate the
following:
Expected Revenue = [(total revenue if recession) * (probability of recession)] +
[(total revenue if level economy) * (probability of level economy)] + [(total
revenue if strong economy) * (probability of strong economy)].
We were given the probabilities of the various scenarios: 50% for the level
case; 25% each for the extremes. Thus, the only thing we need to do is find the
revenues for each of the scenarios.

5.
Scenario I:
Recession
Scenario II:
Level
Economy
Scenario III:
Strong Economy
High-Priced Boats
Category
Unit Sales
80 400 1500
Average price per unit
$100,000 $110,000 $115,000
Category Revenue
$8,000,000 $44,000,000 $172,500,000
Medium-Priced Boats
Category
Unit Sales
160 800 3200
Average price per unit
$80,000 $90,000 $100,000
Category Revenue
$12,800,000 $72,000,000 $320,000,000
Low-Priced Boats
Category
Unit sales
320 1600 6400
Average price per unit
$70,000 $70,000 $70,000
Category Revenue
$22,400,000 $112,000,000 $448,000,000
TOTAL REVENUE
$43,200,000 $228,000,000 $940,500,000
Probabilities
25% 50% 25%
TR*(probability)
$10,800,000 $114,000,000 $235,125,000
Expected Revenue = ∑TR*
= $10,800,000 + $114,000,000 + $235,125,000
= $359,925,000

6.
13-9 Break-even Analysis
a. Calculate the missing information for each of the above projects!
b. Note that Project C and D share the same accounting break-even. If sales
are above the break-even point, which project do you prefer? Explain why
c. Calculate the cash break-even for each of the above projects! What do the
differences in accounting break-even and cash break-even tell you about
the four projects?
Answers:
a. Qacc. BE =
𝐹.𝐶𝐹𝐶+𝐷
𝑃−𝑉
Project A
P = [(CFC + D) / A] + V
= [(120,000 + 20,000) / 6250] + 55
= $77.4
Project B
V = P – [(CFC + D) / A]
= 1,200 – [(450,000 + 150,000) / 750]
= $400
Project C
D = (P – V) × A – CFC
= (20 – 15) × 2,000 – 5,000
= $5,000
project Accounting
break-even
point (in units)
Price per
unit
Variable
cost per
unit
Fixed
costs
Depreciation
A 6,250 ? $55 $120,000 $20,000
B 750 $1,200 ? $450,000 $150,000
C 2,000 $20 $15 $5,000 ?
D 2,000 $20 $5 ? $15,000

7.
Project D
CFC = [(P – V) × A] – D
= [(20 – 5) × 2,000] – 15,000
= $15,000
b. Projects C and D have the same accounting break-even level of 2000 units.
However, if we had sales above that level, we would prefer project D.
Project C as much higher variable costs than D, so that we get only ($20 -
$10) = $10 gross profit per unit. However, with project D, we pay only $5 in
variable cost per unit, so that each $25 sale gives us an extra $20.
c. Cash break-even point
Project A = CFC / (P – V)
= 120,000 / (77.4 – 55)
= 5,357
Project B = CFC / (P – V)
= 450,000 / (1,200 – 400)
= 562.5
Project C = CFC / (P – V)
= 5,000 / (20 – 15)
= 1,000
Project D = CFC / (P – V)
= 15,000 / (20 – 5)
= 1,000
Difference in break-evens (% of
accounting)
% = (A – C) / A
Depreciation as % of total fixed
costs
% = D / (CFC + D)
14.30% 14.30%
25% 25%
50% 50%
50% 50%

8.
As the cash break-even for each project calculated, we find the number of
units that the firm must sell to cover the cash fixed costs. This will clearly be
a lower number of units than the accounting break-even. As shown above,
the cash break-evens for the four projects are 5357, 562.5, 1000, 1000,
respectively.
What’s the difference between accounting and cash break-even measures
imply? The difference between the two measures reflects the relative
importance of depreciation in the firm’s fixed-cost structure. When
depreciation makes up half of the firm’s total fixed costs, the cash break-
even will be only half of the accounting break-even. However, when
depreciation is only 14.30% of total fixed costs (as with project A), the cash
break-even is only 14.30% lower than the accounting break-even.