Calculation of net present value with given cash flow

Reference no: EM1313234

Calculation of net present value with given cash flow and probability

A firm's weighted average cost of capital is 10% and has a $4000 project with the following estimates of cash flows under three possible states of nature. The project can be liquidated in year 2 at a cost of $400 in all three states of nature. Should the company undertake the project? If a real option exists, determine its value. Support your conclusion quantitatively.

Reference no: EM1313234

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