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Consider a new technology that would costs an immediate $100 million and another $100 million at the end of year 1. It is estimated that the technology will be successful with probability 50%. If successful, the technology will generate free cash flows of $80 million starting at the end of year 2 up to infinity. If unsuccessful, the technology will generate no cash flows.

Assuming a discount rate of 20%, what is the NPV of investing in this technology?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92726327

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