What Is the Expected NPV of the Project with the Option

question 90

Multiple Choice

What is the expected NPV of the project with the option to expand if the probability of modest success is revised to 70% and great success to 30%?

• A) $310,000
• B) $155,00 (no change)
• C) $213,000
• D) $97,000

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Definitions:

Demand Deposits

Bank account balances that can be withdrawn on demand with no prior notice, such as checking accounts, providing liquidity and flexibility for accountholders.

Inflation

The rate of growth in the average cost of goods and services, which lowers the purchasing capacity.

Loses Value

A term referring to the decrease in worth of an asset or currency over time.

FDIC

The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation providing deposit insurance to depositors in U.S. commercial banks and savings institutions.