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You are planning to produce a new action figure called Nia. However, you are very uncertain about the demand for the product. If it is
You are planning to produce a new action figure called "Nia". However, you are very uncertain about the demand for the product. If it is a hit, you will have net cash flows of $50 million per year for three years (starting next year [i.e., at t=1] ). If it fails, you will only have net cash flows of $10 million per year for two years (also starting next year). There is an equal chance that it will be a hit or failure (probability =50 percent). You will not know whether it is a hit or a failure until after the first year's cash flows are in (i.e., at t=1 ). You must spend $80 million immediately for equipment and the rights to produce the figure. If the discount rate is 10 percent, calculate Nia's NPV
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