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Two firms are both considering investing $11m in a new technology. There is a 50%...

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Finance

Two firms are both considering investing $11m in a new technology. There is a 50% chance the technology will work as planned and expected net cash flows will be $2.5m per year and a 50% chance of technical problems that will reduce expected net cash flows to $0.75m per year. Either way, net cash flows would begin a year after investing and continue indefinitely.

The required return on the project is 15% per year.

Calculate the NPV to each firm from investing now.

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