Economists at PHE Llc Estimate a 20% Probability of a Recession

question 36

Multiple Choice

Economists at PHE Llc estimate a 20% probability of a recession next year, a 50% probability of an average economy, and a 30% probability of a rapid expansion. If there is a recession, the NPV of project O will be $20 million; if the economy is average, it will be $45 million and in case of a rapid expansion, it will be $75 million. What is the expected NPV of the project?

• A) $57.5 million
• B) $49 million
• C) $46.67 million
• D) $45 million

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Definitions:

Sources

Refers to the origins or places from which something is obtained, often used in the context of gathering information or materials.

Emissions Tax

A tax imposed on the emission of pollutants, aimed at reducing environmental harm by incentivizing companies to lower their pollution levels.

Marginal Benefit

The further enjoyment or utility obtained when one more unit of a product or service is consumed.

Pollution

The existence or entry of a harmful or toxic material or object into the environment.