Use the Following Information to Answer the Following Question(s)

question 3

Multiple Choice

Use the following information to answer the following question(s) .
Enrico,the owner of a pizza parlor near a large university campus,is considering opening a shop specializing in quick,inexpensive take-out meals that are low in fat and calories.He will use a vacant space adjacent to the pizza parlor.Assume that the project requires an initial cash outlay of $100,000.Finance students from the university have taken on the project as a course assignment.They believe that there is a 50% chance that the project will have modest success and return $11,000 per year for the foreseeable future (a perpetuity) .On the other hand,there is a 50% chance that the project will be highly successful and produce returns of $20,000 per year in perpetuity.If the restaurant is modestly successful,Enrico will keep it open,but not expand.If it is well received,he will immediately open 2 more shops at sites close to the sprawling campus.The additional shops would have approximately the same cash flow as the first.Cash flows will be discounted at 10%.
-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)$155,000 (no change)
• C)$213,000
• D)$97,000

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Definitions:

Brain Structure

The arrangement of the various parts of the brain, including its cells and tissues, which is responsible for its functions and capabilities.

Parietal Lobe

One of the four major lobes of the brain, located at the upper back area in the skull, which processes sensory information such as touch, temperature, and pain.

Emotional Experience

The personal feelings or emotions one undergoes in response to external stimuli or internal thoughts.

Sensory Experience

The subjective experience that results from the processing of sensory input (e.g., sight, sound, touch, taste, and smell) by the nervous system.