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You are considering setting up a firm to produce gadgets. The demand for gadgets can be high, medium, or low with equal probability. The corresponding
You are considering setting up a firm to produce gadgets. The demand for gadgets can be high, medium, or low with equal probability.
The corresponding cash flows are: DemandAnnual Cash Flows
High 600
Medium 0
Low-600
These cash flows will begin one year after the investment is made and continue forever. The cost of the project is $300 today. The discount rate is 50% (yes, that
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