Assuming an internship position in a corporation, you've been asked to evaluate a project and during the initial evaluation you determine that there are 9 states that could occur along 2 variables.The first variable is the cost of money, and have predicted the following costs and probabilities:

-- the company could borrow at a WACC of 8% -- this has a 25% chance of occurring

-- the company could borrow at a WACC of 9%-- this has a 40% chance of occurring

-- the company could borrow at a WACC of 10% -- this has a 35% chance of occurring

The second variable is the intensity of competition, and you predict the following intensities and probabilities:

-- the competition is intense -- this has a 20% chance of occurring

-- the competition is normal -- this has a 50% chance of occurring

-- the competition is weak -- this has a 30% chance of occurring

Note : Bracketed numbers are negative

The net present values for each of the nine outcomes are listed below:

Net Present Values: Weighted Average Cost of Capital Note Bracketed numbers are negative 8.00% 9.00% 10.00 % 25.00% 40.00% 35.00% Competition Intense 20.00% $ 500,000 $ (50,000) $ (100,000) Competition Normal 50.00% $ 700,000 $ 350,000 $ 100,000 Competition Weak 30.00% $ 900,000 $ 650,000 $ 300,000 Joint Probabilities: Weighted Average Cost of Capital 8.00% 9.00% 10.00% 25.00% 40.00% 35.00% Competition Intense 20.00% Competition Normal 50.00% Competition Weak 30.00% Expected value