Question: Loyola Turbo Engines is looking at expanding its operations by

Loyola Turbo Engines is looking at expanding its operations by adding another manufacturing location. If successful, the company will make $750,000, but if it fails, the company will lose $300,000. Loyola can borrow the required capital of 300,000 at 16%.
(a) If all their projections point to an 85% probability of success, should they borrow the money and go ahead with the expansion?
(b) Above what minimum probability of success will the project be acceptable with a discount rate of 16%?


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  • CreatedMay 08, 2014
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