a company is considering an investment:

compute the NPV:

given:

inflation rate of 4%

and discount rate of 6%

There are two possible outcomes: 1. 40% success that leads to the following Benefits and Costs: Year Variable Benefit Cost 0 2 6,500 1,000 5,000 3,000 3 4,000 1,000 4 Sum 9,000 1,000 10,000 2. 60% failure that leads to the following Benefits and Costs: Year Variable Benefit Cost 11 2 4,000 1,000 1,0000 4 Sum 1,000 1,000 0 10,000