Question
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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Glencoe Business And Personal Finance
Authors: McGraw-Hill
1st Edition
0021400202, 9780021400201
