Question
Galbraith Co. is considering a four-year project that will require an initial investment of $12,000. The base-case cash flows for this project are projected to
- Galbraith Co. is considering a four-year project that will require an initial investment of $12,000. The base-case cash flows for this project are projected to be $14,000 per year. The best-case cash flows are projected to be $20,000 per year, and the worst-case cash flows are projected to be a -$2,500 per year. The company's analysts have estimated that there is a 50% probability that the project will generate the base-case cash flows. The analysts also think that there is a 25% probability of the project generating the best-case cash flows and a 25% probability of the project generating the worst-case cash flows.
What would be the expected net present value (NPV) of this project if the project's cost of capital is 10%?
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Valuation The Art and Science of Corporate Investment Decisions
Authors: Sheridan Titman, John D. Martin
3rd edition
133479528, 978-0133479522
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