Question
You are considering a project with an opportunity cost of 10% and that offers up the following two possible payouts based on your ability to
You are considering a project with an opportunity cost of 10% and that offers up the following two possible payouts based on your ability to market the product:
In the optimistic state, you expect the following payouts: -$4795, $8,000, $8,000. Based on your pessimistic expectations, you expect the following -$4795, -$500, -$10,000. The cash flows fall at time periods 0, 1, and 2.
Your sense is that there is a 40% chance things will turn out well and a 60% chance things will turn out poorly. What is your expected NPV if you are able to abandon the project after year one?
Use excel and show formula
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