Business, 07.07.2020 19:01 sydneip6174

Garner-Wagner is considering a project that is replicable with a $3,000,000 investment at time zero, and returns $500,000 each year for five years and has a discount rate of I/YR = 10%. If Garner-Wagner goes ahead with this project today, it will obtain knowledge that will give rise to additional opportunities 5 years from now (at t = 5). The company can decide at t = 5 whether or not it wants to pursue these additional opportunities. Based on the best information available today, there is a 35% probability that the outlook will be favorable, in which case the future investment opportunity will have a net present value of $6 million at t = 5. There is a 65% probability that the outlook will be unfavorable, in which case the future investment opportunity will have a net present value of -$6 million at t = 5. Garner-Wagner does not have to decide today whether it wants to pursue the additional opportunity. Instead, it can wait to see what the outlook is. However, the company cannot pursue the future opportunity unless it makes the $3 million investment today. What is the estimated net present value of the project, after consideration of the potential future opportunity?

a. -$1,104,607
b. -$875,203
c. $199,328
d. $561,947
e. $898,205

Answers: 2

Show answers

Another question on Business

Business, 22.06.2019 16:50

Coop inc. owns 40% of chicken inc., both coop and chicken are corporations. chicken pays coop a dividend of $10,000 in the current year. chicken also reports financial accounting earnings of $20,000 for that year. assume coop follows the general rule of accounting for investment in chicken. what is the amount and nature of the book-tax difference to coop associated with the dividend distribution (ignoring the dividends received deduction)?

Answers: 2

Answer

Business, 22.06.2019 22:30

Which of the following describes one of the ways that the demographics of an area affect the price of housing in that area? a. when more people have children, their incomes tend to be higher and the housing prices are also higher. b. older people are more likely to stay in their houses, creating a seller's market that keeps prices low. c. an area with a lower population density won't have enough construction workers to build new houses quickly. d. an area with younger people will have a higher demand for rentals and a lower demand for buying.

Answers: 1

Answer

Business, 23.06.2019 03:00

Atennis club charges a monthly membership fee of $150 and charges it members $10 per hour to use a court. there's also $500 fee to become a member. stella joined the tennis club last spring, and she has been a member for 5 months. she has been playing 10 hours of tennis each month. stella values an hour of her time at $20. during a boring afternoon meeting, stella thinks about reserving a court to work on her serve for an hour tonight. what's stella's opportunity cost of working on her serve for an hour?

Answers: 1

Answer

Business, 23.06.2019 14:50

Idont need this written for me but if someone could just come up with an example that can get the process started for me that would be ! research the consumer services industries in united states. choose any one of the consumer services companies and write an essay of about 500 words on how a diverse economy such as the united states can satisfy the needs of its consumers. consider different cultures and languages, services offered to lower socioeconomic populations, or services offered to disabled consumers or women. also analyze the challenges faced by the consumer service industry.

Answers: 1

Answer

You know the right answer?

Garner-Wagner is considering a project that is replicable with a $3,000,000 investment at time zero,...

Questions