Calculate the enpv

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An investment project requires the investment cost of $500,000 at the present time.

There three possible outcomes for this project: 20% probability of success which yields: annual income of $150,000 for 5 years (from year 1 to 5) and the salvage value of $200,000 at the end of year 5. 50% probability of success which yields:

annual income of $80,000 for 10 years (from year 1 to 10) and the salvage value of $100,000 at the end of year 10. 30% probability of failure: zero income for all the years and salvage value of $250,000 at the end of year 1.

Calculate the ENPV and conclude if this is a good investment, considering the minimum rate of return (discount rate) of 10%.

Reference no: EM131937217

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