Question: Massivesoft Corporation is trying to decide whether or not to invest in a new software project. The initial investment will be $5 million dollars. The

Massivesoft Corporation is trying to decide whether or not to invest in a new software project. The initial investment will be $5 million dollars. The project has a 40% chance of returning $1 million per year into the future and a 60% chance of generating only $100,000 in revenues. Assuming that Massivesoft requires 15% return on capital investments, determine whether or not this is a viable project.

If Massivesoft decides to wait one year before investing in the project, its odds of returning $1 million per year improve to 70%. Should Massivesoft wait two years to initiate the project?

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We can first calculate the NPV of the proposed investment as follows Cash Flows 410000... View full answer

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