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The Quick-Start Company has the following pattern of potential cash flows with their planned investment in a new cold weather system for fuel injected cars.
The Quick-Start Company has the following pattern of potential cash flows with their planned investment in a new cold weather system for fuel injected cars. Assume a discount rate of 10%. Invest $120m After-tax Cash Flow: $60m/year Years 2-5 Not Invest Success (p = .80) Test costs $15m Invest $120m After-tax Cash Flow: $10m/year Years 2-5 Failure (p = 20) Not Invest Nd Test t=0 t=1 t=2.. What is the NPV1 if the test result turns out to be successful? $37.21m $44.54m $51.61m $70.19m $62.25m O QUESTION 26 Continuation of the previous problem: What is the NPV1 if the test result turns out to be unsuccessful? $-88.30m $-72.12m $-61.28m $-54.18m $-42.46m QUESTION 27 Continuation of the previous problems: What is the expected value of NPV1? $31.93m $38.31m $42.33m $45.45m $56.15m QUESTION 28 Continuation of the previous problems: If the company has a discount rate of 10%, what is the NPVO of the project? $9.45m $12.52m $18.03m $26.76m $36.05m
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