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Microsoft has just developed the new Xbox, and it must now decide whether to proceed with production. If it does, Microsoft would have to invest

Microsoft has just developed the new Xbox, and it must now decide whether to proceed with production. If it does, Microsoft would have to invest $700 million in new PP&E immediately. If the Xbox is successful, Microsoft will earn net cash profits of $350 million annually. If the Xbox fails, it will lose $200 million annually. The outcomes are equally likely. If the required rate of return is assumed constant at 10%, would Microsoft decide to proceed with the production? *

a. Yes.

b. No.

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