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Question $21$

$\frac{0}{1}pts$

A company is considering investing in a project in Brazil. If the economy improves the present value $($NPV at time$=1)$ of future discounted expected cash flows will be BRL $20,000,$ and the exchange rate will be BRL $2\mathrm{.}00/$USD$.$ The objective probability that the economy will improve is $60\%.$ If there is a recession, the NPV will be BRL $8,000($NPV at time$=1)$ and the exchange rate will be BRL $2\mathrm{.}5/$USD$.$ The appropriate risk$-$adjusted rate of return $($cost of capital$)$ is $9\%$ in USD. The initial capital investment required at time $0$ is USD $8,000.$ The company always has the option to abandon the project and recover the BRL $12,500$ salvage value $($aftertax$).$ Compute the expected NPV of the project. If your answer is NEGATIVE don't forget to enter the minus sign.

lou Answered

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orrect Answer

$-660\mathrm{.}55$ margin of error $\frac{+}{-}50$