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The company has estimated the net present value of the investment project at - 0 . 3 M . In the calculation, the return on
The company has estimated the net present value of the investment project at M In the calculation, the return on capital requirement has been As illustrated in the picture, the initial investment includes the currently scheduled development phase of M and the subsequent construction phase of the production system of M Two years from now, the first positive free cash flow from sales is scheduled.
The company has prepared two scenarios of the free cash flows generated after the initial investment, ie the development and construction phases. The probability of the realization of the better scenario is estimated to be and the present value of the free cash flows after the initial investment is M The probability of the worse scenario being realized is estimated at and the present value of the free cash flows after the initial investment is M
It would be possible to divide the investment decision into two phases, because before starting the construction phase, it will be found out which scenario will come true. What is the net present value of the investment with these assumptions? Enter the answer to three decimal places xxxx M
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