Business
Business, 12.04.2021 23:20, brin1021

Consider the case: Newtown Propane Co. is considering a three-year project that will require an initial investment of $43,500. If market demand is strong, Newtown Propane Co. thinks that the project will generate cash flows of $28,000 per year. However, if market demand is weak, the company believes that the project will generate cash flows of only $1,500 per year. The company thinks that there is a 50% chance that demand will be strong and a 50% chance that demand will be weak. If the company uses a project cost of capital of 14%, what will be the expected net present value (NPV) of this project?
a. -$ 9,256
b. -$10,182
c. -$9,719
d. -$10,644

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Answers: 2

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