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Assume a 20% chance of failure after the time period zero investment, which would yield...

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Accounting

Assume a 20% chance of failure after the time period zero investment, which would yield a clean-up cost of -$200 in year one. Furthermore, assume a 10% chance of failure after the year one investment, which would result in a salvage value of $100 in year two. Calculate the Expected Net Present Value based on the probabilities provided. All cash flows are in escalated dollars. i* = 15% f = 3%. This is all the information provided.

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-120 -400 200 200 200 200 200 200 200 0 1 2 3 4 5 6 7 8 -120 -400 200 200 200 200 200 200 200 0 1 2 3 4 5 6 7 8

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