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1. Mr. Thompson is considering investing in two period projects with the following probabilities and cash flows: Probability Cash Flow Period 1 .25 1000 .50

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

Probability Cash Flow

Period 1 .25 1000

.50 1200

.25 1400

Period 2 .30 600

.50 1000

.20 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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