What is the npv for proposal

Assignment Help Business Management
Reference no: EM133040654

Problem: $3,000 is required at the beginning to build a factory and that the current cost of capital is 10%. The current price is $500. The future prices are uncertain. Marketing forecasts indicate that there is a 50% chance that prices will go up to $700 next period (and remain there forever), however, there is also a 50% chance that prices will go down to $200 next period.

1. What is the NPV for this proposal? (Show all steps)

2. Now consider the same investment proposal, but with the following change: You are given the option to wait a period to figure out whether the price goes up or down. At the end of the first year, you will have perfect prediction on which investment outcome will occur. You then have the option to make the investment. What is the NPV for this investment project? (Show all steps)

3. What is the value of the option to wait? (Show all steps)

Reference no: EM133040654

Questions Cloud

Why is facebook business model now in question : 1) Why is Facebook's business model now in question?
Assignment on lp modeling and solver : Acme Manufacturing makes a variety of household appliances at a single manufacturing facility. The expected demand for one of these appliances during the next 4
Describe the key performance parameter : 1) Describe the difference between a Key Performance Parameter and a Net-Ready Key Performance Parameter and state why they are important to the warfighter or a
What were the outstanding deposits at may : The total of outstanding deposits on the 30 April bank reconciliation statement was P1,875. What were the outstanding deposits at 31 May
What is the npv for proposal : Problem: $3,000 is required at the beginning to build a factory and that the current cost of capital is 10%. The current price is $500. The future prices are un
Explain briefly why change is important : 1) Explain briefly why change is important? 2) Why should the organization like Blackberry do a change? is it relevant? comment it.
Challenges with conducting performance evaluations : Evaluate the challenges with conducting performance evaluations for expatriate that differ from a traditional performance management system
What is management responsibility regarding fraud : What is management's responsibility regarding fraud? Explain the difference between errors and fraud. Give an example of each
What is the probability that the mean : A popular soft drink is sold in 2-litre (2,000 milliliter) bottles. Because of variation in the filling process, bottles have a mean of 2,000 milliliter and a s

Reviews

Write a Review

Business Management Questions & Answers

  Explain the essential points of article

What is the way to explain the essential points of this article?

  Problem of illegal downloading

Do you think the lawsuits brought by the recording industry will solve the problem of illegal downloading? Are there alternatives? Would legislation help?

  Should the project be purchased

Compute the project's (a) net present value (NPV) and (b) internal rate of return (IRR). (c) Should the project be purchased?

  Receives a payment at the settlement date

Suppose that the settlement price is 95.40. Explain whether the buyer or the seller of the futures contract receives a payment at the settlement date.

  Primary internal considerations for strategic plan

How important is structure/culture compared to the other primary internal considerations for a strategic plan?

  Example of types of business organizations in local business

Provide an example of a nationally known or local business for each of the following types of business organizations- 1) Sole Proprietor 2) Partnership 3) Corporation 4) Limited Liability Company

  What is the difference between shifts in supply

What is the difference between shifts in supply vs. changes in quantities supplied?

  Purchase motivations for b2b and b2c markets

Compare and contrast the purchase motivations for B2B and B2C markets. Include in your discussion, from a marketing manager's perspective

  Effective human resource management

Organizations can effectively reduce unethical corporate behavior through effective human resource management that creates open channels of communication.

  Prepare for anticipated surpluses or shortages of workers

How can contingent employees help an organization prepare for anticipated surpluses or shortages of workers?

  What were this manager main sources of power

What were this manager's main sources of power? Include a discussion of reward power, legitimate power, and expert power as well as other sources of power discussed in the background readings

  Who is allowed to backup data

Describe some of your ideas for backup procedures, who will back up the data, how often and where will the copies be stored, etc?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd