In each year, there is 40% chance of reaching a good economy, and 60% chance of...

 

 

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In each year, there is 40% chance of reaching a good economy, and 60% chance of reaching a bad economy. Project X has the following cashflows in dollars, respectively, depending on how good the economy is. Discount rate is 10% per year. <Project X> -300 Year 0 Good Economy Good Economy 2000 1000 Bad Economy 500 Good Economy Bad Economy 500 -500 Bad Economy -1000 Year 1 Year 2 Q1: What is expected NPV of the project? In each year, there is 40% chance of reaching a good economy, and 60% chance of reaching a bad economy. Project X has the following cashflows in dollars, respectively, depending on how good the economy is. Discount rate is 10% per year. <Project X> -300 Year 0 Good Economy Good Economy 2000 1000 Bad Economy 500 Good Economy Bad Economy 500 -500 Bad Economy -1000 Year 1 Year 2 Q1: What is expected NPV of the project?

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