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Acme Co has decided to make an investment into the electric bicycle business. Acme will need to invest $1,500,000, and production will start immediately. If
Acme Co has decided to make an investment into the electric bicycle business. Acme will need to invest $1,500,000, and production will start immediately. If there is high demand for Acme's electric bicycles (with 20% probability), then it will continue to have high demand and generate $300,000 every year in perpetuity. If there is low demand for Acme's electric bicycles (with 80\% probability), then it will have low demand for two years and generate $50,000 each year for two years. After the two years of low demand, there is another possibility for high or low demand Acme's electric bicycles. If there is high demand for Acme's electric bicycles after two years of low demand (with 30% probability), then it will generate $300,000 each year in perpetuity. If there is low demand for Acme's electric bicycles after two years of low demand (with 70% probability), then it will generate $50,000 each year in perpetuity. Acme's annual required rate of return is 10%. Assume cash flows occur at the end of each year, except for initial cash flows. What is the NPV of this investment? Answer based only on the information provided. Round to the nearest dollar. $-4,132 $9,166$7,665 $2,726 None of the other answers are correct
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