Mr. Thompson is considering investing in two period projects with the following probabilities and cash flows:

	Probability	Cash Flow
Period 1	0.25	1000
	0.5	1200
	0.25	1400
Period 2	0.3	600
	0.5	1000
	0.2	1400

The discount rate is 7%, and the initial investment is $2,000. How much is the expected NPV of this project? Should Mr. Thompson invest or not? Briefly explain your reasoning.

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Expected NPV and Investment Decision Calculating Expected NPV To calculate the expected NP... View the full answer