Consider the following project data: A $500 feasibility study will be conducted at t = 0....

 

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Consider the following project data: A $500 feasibility study will be conducted at t = 0. The best estimate now is that there is an 80 percent chance that the study will indicate potential, and a 20 percent chance that it will not. If the study indicates potential, the firm will spend $1,000 at t = 1 to start production. If the firm starts production, the firm is confident that cash inflows will be $1,100 annually for two years (t=2 and 3). If the appropriate cost of capital is 10 percent, what is the project's expected NPV to the nearest dollar? Consider the following project data: A $500 feasibility study will be conducted at t = 0. The best estimate now is that there is an 80 percent chance that the study will indicate potential, and a 20 percent chance that it will not. If the study indicates potential, the firm will spend $1,000 at t = 1 to start production. If the firm starts production, the firm is confident that cash inflows will be $1,100 annually for two years (t=2 and 3). If the appropriate cost of capital is 10 percent, what is the project's expected NPV to the nearest dollar?

Answer rating: 100% (QA)

lets calculate the expected NPV for the project 1 Potential indicate... View the full answer