An investmet project requires initial investment of 100,000…
An investmet project requires initial investment of 100,000. There are three possible outcomes for this project: 1) 5% probability of sucees that investment yields annual income of 40,000 for eigth years (starting from year 1 to year 8) and zero salvage value 2) 35% probability of sucees that investment yields annual income of 28,000 for eigth years (starting from year 1 to year 8) and zero salvage value3) 60% probability of failure that yields zero annual income but salvage value of 70,000 dollar at the end of year 1 Considering minimum ROR 8%, calculate the expected NPV and explain if this investment is satisfactory. Explain your work in detail including all the required equations and calculations.
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