Question
Big city market wants to introduce a new consumer project. Due to the nature of the investment, the financial advisor is uncertain of future cash
Big city market wants to introduce a new consumer project. Due to the nature of the investment, the financial advisor is uncertain of future cash flows. if the demand is high, net operating cash flows will be 100 million for 10 years. The probability of this event is 60%. If the demand is low, the net operating cash flow will be $30 million for 5 years. If the financial advisor will learn the new product is a success or failure after the first year's cash flow. The required initial investment is 400 million and the discount rate used by the firm is 12%.
What is the Net Present Value of the project?
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