Question
Lakeland, Ltd. is evaluating whether to undertake a new project. The startup cost will be $25,000. The project is estimated to have a life of
Lakeland, Ltd. is evaluating whether to undertake a new project. The startup cost will be $25,000. The project is estimated to have a life of seven years. The following probability distribution is used to find the value of the expected cash inflow for each of the seven years. The cost of capital is 14%. a) b) Find the expected cash inflow. This cash inflow will be the same for each of the seven years. (2 points)
Probability 0.15 0.45 0.40
Cash flow 10000 6800 5900
Find the expected NPV. The first cash inflow will begin at the end of the first year and the subsequent cash in flows will occur at the end of the respective years.
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