Acadian Controls Limited (ACE) is designing a new switching device and is very unsure of just how successful it will be. The project will cost $300,000. Ace uses a 10% discount rate. Ace has derived the following annual year-end cash flow options regarding the project.

Required:
(a) Calculate the expected net present value of the project.
(b) What probability does the project have of being successful?
(c) Would you recommend proceeding with the project?

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Annual Cash Flows Probability Option 1 Option 2 Option 3 Option 4 Option 5 20,000 45,000 75,000 92,000 130,000 20% 10% 50% 10% 10%