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Exhibit 14.4 The Z−90 Project Being Considered by Steppingstone Inc. (SI) Has

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Exhibit 14.4
The Z−90 project being considered by Steppingstone Inc. (SI) has an up-front cost of $250,000. The project's subsequent cash flows are critically dependent on whether another of its products, Z−45, becomes an industry standard. There is a 50% chance that the Z−45 will become the industry standard, in which case the Z−90'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 Z−45 will not become the industry standard, in which case the Z−90'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%.

-Refer to Exhibit 14.4.Based on the above information,what is the Z−90's expected net present value?

Definitions:

More Expensive

A term used to describe goods or services that have a higher price tag compared to other alternatives or previous prices.

Rational Decision Making

The process of making decisions based on logical reasoning, and often involves weighing the pros and cons or analyzing the costs and benefits.

Objective Decision Making

The process of making decisions based on factual information and logical analysis rather than personal feelings or bias.

Minimum Cost

The lowest possible expenditure required to achieve a particular objective or produce a certain amount of goods or services.