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A Capital Investment requires an initial outlay of $1,000. In the first year, it iwll provide cash flows of $300 with a probability of .3,
A Capital Investment requires an initial outlay of $1,000. In the first year, it iwll provide cash flows of $300 with a probability of .3, or $600 with a probablity of .7. If cash flows in the first year are $600, they will be $700 or $800 in the second year, with a .5 probability of each outcome. if cash flows are $300 in the first year, they will be $300 in the second year. At a 10 percent required return, find each possible net present value and its associated probablity. Is this investment attractive?
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