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If the net future worth is positive, indicating a surplus, we should accept the investment. True or false?
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- Describe the net future worth of the project?Minerva will be celebrating her 60th birthday two months from now. She was able to save certain amount of money from her 30 years in public school as Principal. She is now planning to invest it to earn something when she already retires. Which of the following options will you recommend? Why? a. Construct a resort to be rented out to others for team building, seminars, and other gatherings suited to the place; b. Invest in the latest trending Foreign Exchange (FOREX) trading in the Philippines which earns high rate of return; c. Buy different cars to be registered and used for rented transportation like GRAB.True or False AFC=ATC+AVC
- B-2. A firm must decide whether to construct a small, medium or large stamping plant. A consultant’s report indicates a 0.20 probability that demand will be low and 0.80 that demand will be high. If the firm builds a small facility and demand turns out to be low, the Net Present Value (NPV) will be $42M. If demand turns out to be high, the firm can either subcontract and realize the NPV of $42M or expand greatly for a Net Present Value of $48M. The firm could build a medium size facility as a hedge: if demand turns out to be low, its NPV is estimated at $22M; if demand turns out to be high, the firm could do nothing and realize a NPV of $46M, or could expand and realize a NPV of $50M. If the firm builds a large facility and demand is low, the NPV will be ($20M), whereas high demand will result in a NPV of $72M. Analyze and solve this problem using a decision tree What is the Maximin Alternative and c) Compute the…Based on increasing gas prices in the United StatesIf the initial cost of an investment project is not totally sunk (the project is not totally irreversible), one should not consider real options” True or False? Write a short answer that offers a discussion about the statement. (10%)
- Cost-benefit analysis is used to determine the desirability of investing in a project (such as a dam, factory, or public park) by figuring whether its present and future economic benefits outweigh its present and future economic costs. True Falsea. A project costs $10 up front and has net benefits of $15 with probability 0.8 at the end of the second year and otherwise returns nothing. The discount rate is 0.035. What is the NPV? b. At what probability of returning $15 after year 2 would the ENPV be 0?The gain from a project is equally likely to have any value between - $0.15 million and + $0.85 million. What is the 99% value at risk? A) $0.145 million B) $0.14 million C) $0.13 million D) $0.10 million