What is the probability of having a negative present value?

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
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Ab. 117.

A machine is considered for an investment project. The initial investment value of the machine is 870.000 TL. Net yearly income is
expected to be 150.000 TL. The MARR is determined as 9%. The useful life of the machine has probabilities that are shown in the Table
below:
Year Probability
5 0.05
6
7
8
9
10
11
12
a.
0.05
b.
0.15
What is the probability of having a negative present value?
C.
0.30
d.
0.50
0.1
0.15
Select one:
e.
0.70
f.
0.85
0.2
g.
0.95
h.
1
0.2
0.15
0.1
0.05
Transcribed Image Text:A machine is considered for an investment project. The initial investment value of the machine is 870.000 TL. Net yearly income is expected to be 150.000 TL. The MARR is determined as 9%. The useful life of the machine has probabilities that are shown in the Table below: Year Probability 5 0.05 6 7 8 9 10 11 12 a. 0.05 b. 0.15 What is the probability of having a negative present value? C. 0.30 d. 0.50 0.1 0.15 Select one: e. 0.70 f. 0.85 0.2 g. 0.95 h. 1 0.2 0.15 0.1 0.05
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