Expando, Incorporated is considering the possibility of building an additional factory that would produce a new addition to line. The company is currently considering two options. The first is a small facility that it could build at a cost of $8 million. I- new products is low, the company expects to receive $9 million in discounted revenues (present value of future revenues) small facility. On the other hand, if demand is high, it expects $11 million in discounted revenues using the small facility. The option is to build a large factory at a cost of $10 million. Were demand to be low, the company would expect $11 million in di revenues with the large plant. If demand is high, the company estimates that the discounted revenues would be $15 million case, the probability of demand being high is 0.40, and the probability of it being low is 0.60. Not constructing a new factory result in no additional revenue being generated because the current factories cannot produce these new products. a. Calculate the NPV for the following: Note: Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in millions rounded to 1 de place.

Expando, Incorporated is considering the possibility of building an additional factory that would produce a new addition to line. The company is currently considering two options. The first is a small facility that it could build at a cost of $8 million. I- new products is low, the company expects to receive $9 million in discounted revenues (present value of future revenues) small facility. On the other hand, if demand is high, it expects $11 million in discounted revenues using the small facility. The option is to build a large factory at a cost of $10 million. Were demand to be low, the company would expect $11 million in di revenues with the large plant. If demand is high, the company estimates that the discounted revenues would be $15 million case, the probability of demand being high is 0.40, and the probability of it being low is 0.60. Not constructing a new factory result in no additional revenue being generated because the current factories cannot produce these new products. a. Calculate the NPV for the following: Note: Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in millions rounded to 1 de place.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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