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3. You are considering conducting an expansion of an existing solar farm. You believe there is a 10% chance the project will proceed without
3. You are considering conducting an expansion of an existing solar farm. You believe there is a 10% chance the project will proceed without delay in which case it will produce a NPV of $10MM to the company, a 30% chance the project start could be delayed for 2 years while waiting for government approval, and a 40% change the project start will be delayed for 4 years before approval. The delayed start dates will delay the timing of the project costs and revenue, but not otherwise affect the project. There is also the possibility that the required permits will not be approved the project will return a loss of $1 MM to the company. The company discount rate is 7.5%. A) Draw the cumulative distribution function for the value of the project. B) Calculate the expected value of the project. C) Calculate the P10, P50 and P90 values of the project.
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