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Question: Consider a project that requires an upfront payment of $500. Suppose there is a 70% percent chance that the project is moderately successful and generates cash flows of $100 one year from now and $200 two years from now. There is a 30% chance the project is very successful and generates cash flows of $200 one year from now and $200 two years from now. What is the expected net present value (NPV) of the project if the firm's discount rate is 5% (or 0.05)?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M93121162

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