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Consider the following potential outcomes for a project: Outcome Probability Quantitative Outcome Total Failure Partial Failure Total Success 40% 40% 20% Project yields technology
Consider the following potential outcomes for a project: Outcome Probability Quantitative Outcome Total Failure Partial Failure Total Success 40% 40% 20% Project yields technology that will earn the company $1,000/yr for 5 years. Project yield technology that will earn the company $1,000/yr for 15 years. Project yields technology that will earn the company $5,000/yr forever. If investment in the project costs $10,000 and the annual discount rate for a project of this risk-level is 10%, what is the expected Net Present Value?
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SOLUTION To calculate the expected Net Present Value NPV of the project we need to calculate the pre...
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Fundamentals of Corporate Finance
Authors: Berk, DeMarzo, Harford
2nd edition
132148234, 978-0132148238
