Question: Need help for this question A firm is trying to decide whether to invest not on a project related to the production of a very
Need help for this question
A firm is trying to decide whether to invest not on a project related to the production of a very special machine. The factory to produce it will cost 1600mil and will produce one such machine per year forever with zero operating cost. Currently, the price of such a machine is 200mil but next year the price will change. With probability 50% it will rise to 300mil and with probability 50% it will fall to 100mil. The price then will remain at the same level forever. If the appropriate discount rate for this project is 10% is this a good investment? Discuss and provide sophisticated analysis?
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