Over the year, Phelps Toy Company had developed a manual to evaluate capital budgeting projects. As a first step, lke Barnes was raquired to predict anticipated sales over the next six years. While he thought this was too short a time period to evaluate the full potential of the project, he knew he had no choice but to go along with company policy. He decided to project a range for potential sales in 1994 ( the first year of business ) and assign probabilities to the outcomes. The information is shown in Figure 2