Use the Information for the Question(s)below

question 26

Multiple Choice

Use the information for the question(s) below.
DM Skateboard company is planning to develop a new electric skateboard.In order for the project to be successful,the company must develop a new deck to accommodate a lightweight battery and a remote that is easy to operate while moving in an open environment.The company estimates the following costs,times,and probabilities of success for each component of the new skateboard: All three risks are idiosyncratic and the risk-free rate of interest is 5%.The company does not have the resources to develop all the components at the same time.Therefore,management needs to decide in what order to develop the technologies.
-Assume DM Skateboard Company has estimated that,if all stages are successful,the present value of all future profits will be $4 million (valued at the completion of all three phases of development) .If DM does the three stages in the correct order,what is the NPV of the project?

• A)$128.13 thousand
• B)-$34.50 thousand
• C)$65.18 thousand
• D)$3.79 million

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