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What is the expected value of the expansion

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Reference no: EM133086033

Question - Because of uncertainty regarding future use of an expanded facility, the time at which the expansion will be used is currently being studied. The estimated probabilities of expansion at various times in the future as follows:

Expansion in

Probability

3 years

0.1

4 years

0.2

5 years

0.3

6 years

0.4

The future cost of expansion will be $2,000,000 plus $250,000 for every year that the expansion is delayed. If money can earn 12% per year, what is the expected value of the expansion? Use + sign for all negative cash flows.

Reference no: EM133086033

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