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Q11. A 2-year project costs $500 and promises the following cash flows: Scenario Probability Year 1 Year 2 a booming success 20% $1,000 $800 a
Q11. A 2-year project costs $500 and promises the following cash flows:
Scenario | Probability | Year 1 | Year 2 |
a booming success | 20% | $1,000 | $800 |
a moderate success | 30% | $500 | $300 |
barely survive | 40% | $100 | $50 |
fail entirely | 10% | -$500 | -$500 |
The appropriate discount rate is 10% per annum. Should you invest in this project?
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