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Suppose a proposed public policy could result in three possible outcomes: (1) present value of net benefits of $5,000,000 (2) present value of net benefits of $1,000,000 or (3) present value of net benefits of -$12,000,000 (loss). Suppose society is risk-neutral and the probability of occurrence of each outcome is respectively 0.8, 0.1, and 0.1. Should this policy be pursued or not? Why?

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Financial Management, Finance

Category:- Financial Management
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