Rose Apothecary is considering expanding its business to include a second store. David Rose, the CEO, believes that a marketing study would help to determine the overall demand for the store. Part A: Without the marketing study, the company estimates that there will be an up-front cost of $100,000 to get the new store up and running. The expectation is that there is a 50% chance that the store will generate annual cash flows of $48,000 per year for the subsequent four years and a 50% chance that the store will generate annual cash flows of $22,000 per year for the subsequent four years. What is the NPV of the store expansion project, assuming a 15% cost of capital?
Rose Apothecary is considering expanding its business to include a second store. David Rose, the CEO, believes that a marketing study would help to determine the overall demand for the store.
Part A: Without the marketing study, the company estimates that there will be an up-front cost of $100,000 to get the new store up and running. The expectation is that there is a 50% chance that the store will generate annual cash flows of $48,000 per year for the subsequent four years and a 50% chance that the store will generate annual cash flows of $22,000 per year for the subsequent four years. What is the
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