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A Decision Tree Shows a 30 Percent Probability of $2

Question 107

Multiple Choice

A decision tree shows a 30 percent probability of $2 million in returns and a 70 percent chance of $1 million in returns.What is the maximum you would invest today in this project if the cash in-flow occurs one year in the future and the discount rate is 10 percent?


A) $818,182
B) $1,181,818
C) $1,300,000
D) $1,363,636 NPV = - investment
0 = - investment

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