The factorys expected value is E(Value at Time 2) = [0.5 . $500,000 + 0.5 . $1,000,000]
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The factory’s expected value is E(Value at Time 2) = [0.5 . $500,000 + 0.5 . $1,000,000] = $750,000. Its present value is therefore $750,000/1.062 ≈ $667,497.33.
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