A firm is considering investing $10 million today to start a newproduct line. The future of the project is unclear however anddepends on the state of the economy. The project will last 5 years.The yearly cash flows for the project are shown below for thedifferent states of the economy. What is the expected NPV for theproject if the cost of capital is 12%? (Show your work. Label $. Nodecimal places required. Highlight or bold your answer.)
Project | Chance of | Yearly |
Outcome | Outcome | Cash Flow |
GOOD | 25% | $8,000,000 |
AVERAGE | 50% | $3,000,000 |
BAD | 25% | ($2,000,000) |
