Question: You are considering producing a new product, which if it is successful will produce cash flows of $15,000 per year in perpetuity. If it is

You are considering producing a new product, which if it is successful will produce cash flows of $15,000 per year in perpetuity. If it is unsuccessful, the cash flow will be -$10,000 in the first year and then you will shut down. If the probability of success is 0.4 and the opportunity cost of capital is 7 percent, what is the maximum that you would be willing to pay to undertake the investment?

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