Question: Consider building a widget factory that will produce one widget per year forever. The price of a widget now is $100, but next year it

Consider building a widget factory that will produce one widget per year forever. The price of a widget now is $100, but next year it will go up or down by 50%, and then remain fixed:

The cost of the factory is $800, and it only takes a week to build. Is this a good investment? Should we invest now, or wait one year and see whether the price goes up or down? Assume that the WACC is 10%. You will produce the first widget at time=1.

invest now. the NPV of the project is $200

wait one year. The NPV of the project will be $386.36.

How do I get the 386.36 NPV? I know thats the correct answer but I cant figure out how to find that.

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