Upon further investigation it is found that there is a significant chance that the expected sales...

 

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Upon further investigation it is found that there is a significant chance that the expected sales volume of 20,000 units per year will not be achieved. The sales manager of Umunat Inc suggests that sales volumes could depend on expected economic states that could be assigned the following probabilities: Economic state Probability Annual sale volume (units) Poor 0.3 Normal Good 0.6 0.1 17,500 20,000 22,500 Calculate and comment on the expected net present value of the project. Upon further investigation it is found that there is a significant chance that the expected sales volume of 20,000 units per year will not be achieved. The sales manager of Umunat Inc suggests that sales volumes could depend on expected economic states that could be assigned the following probabilities: Economic state Probability Annual sale volume (units) Poor 0.3 Normal Good 0.6 0.1 17,500 20,000 22,500 Calculate and comment on the expected net present value of the project.

Answer rating: 100% (QA)

Given Cost of the project 500000 Revenue per unit 200 Discount rate 10 Project duration 5 years Expe... View the full answer