The project defined by the following decision tree has a required discount rate of 17 percent. What is the Time 0 net present value of a successful test and investment?

Name: The project defined by the following decision tree has a required discount rate of 17 percent. What is the Time 0 net present value of a successful test and investment?
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Question

The project defined by the following decision tree has a required discount rate of 17 percent.  What is the Time 0 net present value of a successful test and investment?

Quizplus · Accepted Answer

NPV₁ = -$100,000,000 + $66,000,000[(1 - 1 / 1.17⁴)/ 0.17] = $81,053,511 NPV₀ = -$20,000,000 + 0.6 × ($81,053,511 / 1.17)+ (0.4 × $0)= $21,565,903

The Project Defined by the Following Decision Tree Has a Required