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Consider the following situation faced by a manufacturing company - marketing and sales reports predict that the company s low - price product will either

Consider the following situation faced by a manufacturing company - marketing and sales reports predict that the companys low-price product will either be a blockbuster, a success, or a dud. Assume that the demand forecast for those three scenarios is, respectively: 100 thousand units per year with likelihood of 25%,50 thousand units per year with 50% likelihood, or 10 thousand units per year with 25% likelihood.
The cost structure is assumed to be as follows. Capacity expansion incurs a fixed cost of $0.5 million plus a marginal cost of $10 per unit of capacity; i.e., adding production capacity of 50,000 units per year costs $1.0 million. The process and product technology is commercially viable for four years (at that point a new technology would be needed, an issue we will ignore for now). The company expects each product to contribute about $20 in operating profits. A 25% discount rate is used for these types of investment projects. Assume that the capacity expansion can only be done in increments of 10,000 units. (Round up or down the capacity calculations accordingly). What is the manufacturing companys option value of waiting?
Group of answer choices
53,400
-27,680
-76,250
172,320

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