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ICA: Option to Invest (NPV Comparison) - The present value of the investment is assumed to be $20 million regardless of when investment in made.

ICA: Option to Invest (NPV Comparison)

- The present value of the investment is assumed to be $20 million regardless of when investment in made.

- Price of oil (uncertain)

P = $15 or $25 with equal probability

Variable production cost V = $8 per barrel

- E (production) = Q = 200,000

- Discount Rate i = 10%

Calculate

NPV (Invest Today), NPV (Wait 1 Year)

Compare

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