Question
A corporation is trying to decide whether to buy the patent for a product designed by another company. The decision to buy will mean an
"A corporation is trying to decide whether to buy the patent for a product designed by another company. The decision to buy will mean an investment of $9 million, and the demand for the product is not known. If demand is light, the company expects a return of $2.21 million each year for the first three years and no return in the fourth year. If demand is moderate, the return will be $3.03 million each year for four years, and high demand means a return of $4.29 million each year for four years. It is estimated the probability of a high demand is 0.4, and the probability of a light demand is 0.24. The firm's interest rate is 15.7%. Calculate the expected present worth of the patent. Express your answer in millions of dollars. For example, if the answer is $12.3 million, enter 12.3. (All figures represent after-tax values.)"
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