A Factory Currently Produces Output That Sells for $125 Million

question 52

Multiple Choice

A factory currently produces output that sells for $125 million. Production costs are $100 million. Each year it is equally likely that the selling price of the output will be 25% higher or
30% lower. Assume the cost of capital is 10%, and that it will cost nothing to close the plant or
To reopen it. What is the present value of this factory if it exists for 2 years?

• A)$41.80
• B)$50.04
• C)$36.35
• D)$57.73

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Definitions:

Osteoblasts

Osteoblasts are specialized cells involved in the synthesis and mineralization of bone during both initial bone formation and later bone remodeling processes.

Basic Multicellular Unit

A functional unit of bone, responsible for bone remodeling, consisting of osteoclasts that resorb bone and osteoblasts that form new bone.

Ethmoid

A spongy bone located between the eyes that forms part of the nasal cavity and the orbits of the eyes, contributing to the structure of the face and the sense of smell.

Sphenoid

A complex bone at the base of the skull, involved in the formation of the cranial floor and containing the sphenoid sinus.