Revisit General Designs option to grow in Problem 17. Suppose you are at time 2, and stage

Question:

Revisit General Design’s option to grow in Problem 17. Suppose you are at time 2, and stage 1 has been successful. Because the stage 2 cash flows are now relatively certain, their is now 10 percent (which is lower than the for stage 1).
a. What is the revised NPV at time 2 of stage 2?
b. What is the revised total NPV at time 0 for both stages?
Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...