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A networking service company is examining two mutually exclusive projects. The probability distributions of annual cash inflows are presented below: Year 1 Year 2 Initial
A networking service company is examining two mutually exclusive projects. The probability distributions of annual cash inflows are presented below:
Year 1 | Year 2 | ||
Initial Probability | Cash Flow | Initial Probability | Cash Flow |
0.30 | 800 | 0.50 | 900 |
| 0.50 | 700 | |
0.40 | 500 | 0.25 | 800 |
| 0.50 | 700 | |
0.25 | 600 | ||
0.30 | 200 | 0.60 | 200 |
| 0.40 | 200 |
If the risk-free rate is 4% and the company's required rate of return is 10%, calculate the expected NPV for the project. What is the probability that Treasury securities would be a better investment?
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