Calculate the expected npv

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Reference no: EM132033288

Tropical Sweets is considering a project that will cost $30 million and will generate expected cash flows of $23 per year for two years.

The cost of capital for this type of project is 10 percent and the risk-free rate is 5 percent.

After discussions with the marketing department, you learn that there is a 20 percent chance of high demand, with future cash flows of $50 million per year.

There is a 50 percent chance of average demand, with cash flows of $20 million per year as well as 30 percent chance of low demand with cash flows of only $10 million per year.

What is the expected NPV?

Reference no: EM132033288

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