Question
A company is considering investing in a project. The present value (PV at time=1) of future discounted expected cash flows is either 10,000 if
A company is considering investing in a project. The present value (PV at time=1) of future discounted expected cash flows is either 10,000 if the market goes up or 2,000 if the market goes down next year. The objective probability the market will go up is 60%. The appropriate risk- adjusted rate of return (cost of capital) is 10%. The initial capital investment required at time 0 is 8,000. Compute the PV of the project.
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Introduction to Finance Markets Investments and Financial Management
Authors: Melicher Ronald, Norton Edgar
15th edition
9781118800720, 1118492676, 1118800729, 978-1118492673
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