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A given investment has 2 phases, each requiring $50M. After phase 1, you learn if the demand will be high or low. Under high
A given investment has 2 phases, each requiring $50M. After phase 1, you learn if the demand will be high or low. Under high demand, profits will be 170M. Under low demand, profits will be 10M. Probability of low demand is 50% What's the expected value of the project? (a)Assume that you can't abandon the investment before phase 2 (b)Assume that you can abandon the investment before phase 2
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SOLUTION a Assuming that you cant abandon the investment before phase 2 the expected value of the project is Expected Value Probability of High Demand x Profits in High Demand Probability of Low Deman...
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Contemporary Engineering Economics
Authors: Chan S. Park
5th edition
136118488, 978-8120342095, 8120342097, 978-0136118480
