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Business, 12.03.2020 18:04 anonymous777739
All American Telephones Inc. is considering the production of a new cell phone. The project will require an investment of $13 million. If the phone is well received, the project will produce cash flows of $8 million a year for 3 years, but if the market does not like the product, the cash flows will be only $2 million per year. There is a 50% probability of both good and bad market conditions. All American can delay the project a year while it conducts a test to determine whether demand will be strong or weak. The delay will not affect the dollar amounts involved for the projectâs investment or its cash flowsâonly their timing. Because of the anticipated shifts in technology, the 1-year delay means that cash flows will continue only 2 years after the initial investment is made. All Americanâs WACC is 8%. What action do you recommend?
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All American Telephones Inc. is considering the production of a new cell phone. The project will req...
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