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Question 3: 10 points Consider two projects as represented in the following table. Each of these projects results in a new technology that the firm
Question 3: 10 points Consider two projects as represented in the following table. Each of these projects results in a new technology that the firm would like to incorporate in its product. As a result. it has value from only one of the technologies. How should it choose its projects and conduct these projects to maximize its portfolio value if the interest rate is 10%? Project Probability 0.6 Table 1: Project Characteristics 1. What is the expected value that can be obtained if the firm does A first and then B if necessary? 2. What is the expected value if the firm does B first and then A if necessary? 3. Which yields higher profits and why
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