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We expect a project to generate cash flow of 5,000over the next7years.But wealso expect to find out if the project is a success or failure.
We expect a project to generate cash flow of 5,000over the next7years.But wealso expect to find out if the project is a success or failure. If it is a success, it will produce the cash flow of$11,000 per year; and if it is a failure, the cash flow will be only $1,000 per year. The project can be abandoned in one year - and in that case, the sale of the assets tied up in the project is expected to generate the cash flow of $15,000. What is the NPV of the project if the discount rate is 14%and the probability of success is 40%?
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