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Mr. Thompson is considering investing in two period projects with the following probabilities and cash flows: Probability cashflow Period 1 .251000 .501200 .251400 Period 2

Mr. Thompson is considering investing in two period projects with the following probabilities and cash flows:

Probability cashflow

Period 1 .251000

.501200

.251400

Period 2 .30600

..501200

.201400

The discount rate is 7%, and the initial investment is $2,000. How much is the expected NPV of this project? Should Mr. Thompson invest or not? Briefly explain your reasoning.

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