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Exhibit II The cash flows of a two-year project when demand turns out to be high and when demand tums out to be low are

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Exhibit II The cash flows of a two-year project when demand turns out to be "high" and when demand tums out to be "low" are presented below. The probability that demand will be "high" is 50% and the probability that demand will be "low" is 50%. The appropriate discount rate is 11% Cash flow it Cash flow if demand is "high" demand is low Year 0 -S100 -$100 Year! S100 $50 Year 2 $100 $50 Refer to Exhibit II. What is the expected NPV of the project? Round your final answer to the nearest dollars If demand turns out to be "high" suppose that the firm has the option to invest an additional $30 at the end of Year I to increase luction capacity. Doing so would result in an annual cash flow of $200 (rather than $100) at the end of Year 2. What is the expected NPV of the project for accounting for this exportion option Round your final answer to the nearest dollar Refer to your previous answers. What is the value for this expansion option? Round your final answer to the nearest dollars

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