Question
Ache Co. is considering a four year project that will require an initial investment of $15,000. The base-case cash flow for this project are projected
Ache Co. is considering a four year project that will require an initial investment of $15,000. The base-case cash flow for this project are projected to be $14,000 per year. The best-case cash flows are projected to e $26,000 per year, and the worst case cash flows are projected to be -$4,500 per year. The company's analysts have estimated that there is a 50% probability that the project will generate the base-case cash flows. The analysts also think that there is a 25% probability of the project generating the best case cash flows and a 35% probability of the project generating the worst-case cash flows.
9. What would be the expected net present value (NPV) of this project's cost of capital is 14%
a. $23,163
b. $25,268
c. $21,057
d. $25,216
how do you work this problem?
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