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Jetson Industries is looking at a particular project that has the following projected cash flow based on the table below. Risk Free Rate 5% Cost
Jetson Industries is looking at a particular project that has the following projected cash flow based on the table below. Risk Free Rate 5% Cost of Capital 10% Cost Prob Future Cash Flows Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Option 1. -$100 HIGH 30% $50 $50 -$50* $50 $50 $50 Option 2. -$100 MED 40% $40 $40 $40 $ 0 $ 0 $ 0 Option 3. -$100 LOW 30% $30 $30 $30 $ 0 $ 0 $ 0 *Notes: The Year 3 CF includes the cost of the project if it is optimal to replicate. Calculate the NPV for the HIGH option:
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