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Evaluating a proposed expansion project

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You are evaluating a proposed expansion project and you determine that the Discounted Cash Flow - Net Present Value (DCF-NPV) is -RM30,000. However, by investing today, you think you might have a future growth option to expandfurther but it would cost you an additional RM40,000 (in today's dollars) to have this option. If this future opportunity occurs, you estimate the present value of thisoption will be RM200,000. However, there is only a 50 percent chance of this occurring. Does the growth option make investment in the proposed project apositive NPV?

Reference no: EM133056836

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