Sixty Second Avenue Inc. is looking at investing in a production facility that will require an initial investment of $500,000. The facility will have a three-year useful life, and it will not have any salvage value at the end of the projects life. If demand is strong, the facility will be able to generate annual cash flows of $260,000, but if demand turns out to be weak, the facility will generate annual cash flows of only $125,000. Sixty Second Avenue Inc. thinks that there is a 50% chance that demand will be strong and a 50% chance that demand will be weak.

If the company uses a project cost of capital of 12%, what will be the expected net present value (NPV) of this project?

-$18,824

-$37,648

-$26,353

-$24,471

Sixty Second Avenue Inc. could spend $510,000 to build the facility. Spending the additional $10,000 on the facility will allow the company to switch the products they produce in the facility after the first year of operations if demand turns out to be weak in year 1. If the company switches product lines because of low demand, it will be able to generate cash flows of $255,000 in years 2 and 3 of the project.

What is the expected NPV of this project if Sixty Second Avenue Inc. decides to invest the additional $10,000 to give themselves a flexibility option? (Note: Do not round your intermediate calculations.)

$35,233

$88,083

$45,392

$50,436

What will be the value of Sixty Second Avenue Inc.s flexibility option?

ixcty Second Avenue. Inc. is looking at investing in a pro - jction facility that will require an initial investment of 5500,000 . The facility wili have a hree-year useful life, and it will not have any salvage value ot the end of the project's life, If demand is strong, the faolity will be able to generate innual cash flows of $260,000, but if demand tums out to be wee 2 , the facality will generate annual cash fiows of only 5125,000 . Sixty Second Avenue nc. thinks that there is a 50% chance that demand will be strong aid a 50 chance that demand will be weak: If the company uses a project cost of capital of 12%, what will be the expected net present value (NPP) of this project? $18,824$37,648$26,353524,471 Soxty Second Avenue Inc. could spend $510,000 to build the facility. Spending the additional 310,000 on the facility will allow the company to switch the products they produce in the facility after the frrst year of operations if demand tuens out to be weakin year 1 . If the company swithes product lines because of low demand, it will be able to generate cash. flows of 3255,000 in years 2 and 3 of the project. What is the expected NPV of this project if Sixty Second Avenue line. deodes to invest the additional 510,000 to give themselies a fiexibility. 60b on? (Note: Do not round your intermediate calculstions.) 935,233 585,053 545.392 550,435 Soxty Second Avenue Inc. could spend $510,000 to build the faolity. Spending the additional $10,000 on the frolity mill allow the company to saith the products they produce in the facility after the first year of operatons if demand turns out to be weak in year 1 . If the company switches product lines because of low demand, it will be able to generate cast flows of 2255,000 in years 2 and 3 of the project. What is the expected NPV of this project if Sixty Second Avenue Inc. deudes to invest the additional s10,000 to give themselves a fiexbility option? (Note: Do not round your intermediate calculations.) $35,233 488,033 145,392