Oklahoma Instruments (OI) Is Considering a Project Called F-200 That

question 11

Multiple Choice

Oklahoma Instruments (OI) is considering a project called F-200 that has an up-front cost of $250,000. The project's subsequent cash flows are critically dependent on whether another of its products, F-100, becomes an industry standard. There is a 50% chance that the F-100 will become the industry standard, in which case the F-200's expected cash flows will be
$110,000 at the end of each of the next 5 years. There is a 50% chance that the F-100 will not become the industry standard, in which case the F-200's expected cash flows will be $25,000 at the end of each of the next 5 years. Assume that the cost of capital is 12%.
-Based on the above information, what is the F-200's expected net present value?

• A) -$6,678
• B) -$3,251
• C) $15,303
• D) $20,004
• E) $45,965

---

Definitions:

Level 2

Refers to an intermediate stage or level in a classification system or hierarchical structure.

Sudden Cardiac Death

The unexpected loss of heart function, breathing, and consciousness, typically resulting from an electrical disturbance in the heart.

Musculoskeletal Injuries

Injuries or damage to the bones, muscles, ligaments, or tendons due to sudden impact, overuse, or strain.

Osteoporosis

A medical condition characterized by the weakening of bones, making them fragile and more likely to break.