Question
An investment in a truck is expected to have initial cost N in the year 2020, annual net benefits that start at 20,000$/yr in
An investment in a truck is expected to have initial cost N in the year 2020, annual net benefits that start at 20,000$/yr in 2019 and grow at 2%/yr compounded until 2130 and a resale value of N2 when sold in 2030. N(240, 30) and N(160, 40) are normally and independently distributed, with their means and standard deviations given in thousands of $. The interest rate is 5%/yr. Find: a. (7%) The expected net present value of this investment. b. (7%) The probability that this investment will be profitable.
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a The expected net present value of this investment is given by NPV 20000 1 0051 20000 102 1 0052 20...Get Instant Access with AI-Powered Solutions
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Contemporary Financial Management
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
10th Edition
978-0324289114, 0324289111
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