Chrustuba Inc

question 10

Multiple Choice

Chrustuba Inc.is evaluating a new project that would cost $9 million at t = 0.There is a 50% chance that the project would be highly successful and generate annual after-tax cash flows of $6 million during Years 1,2,and 3.However,there is a 50% chance that it would be less successful and would generate only $1 million for each of the 3 years.If the project is highly successful,it would open the door for another investment of $10 million at the end of Year 2,and this new investment could be sold for $20 million at the end of Year 3.Assuming a WACC of 10.0%,what is the project's expected NPV (in thousands) after taking into account this growth option? ​

• A)$2,776
• B)$3,085
• C)$3,393
• D)$3,733
• E)​

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Definitions:

Aggressiveness

A behavior characterized by boldness or assertiveness, with a tendency to confront or attack.

Operant Conditioning

A method in which learning occurs by altering the level of a behavior through the application of reinforcers or punishments.

Immediate Reinforcement

The instant reward or punishment following a behavior, influencing the likelihood of that behavior's occurrence in the future.

Cognitive Processes

Mental activities that include thinking, knowing, remembering, judging, and problem-solving.