Johnson Ltd. determined that the net present value of an investment in technological improvements at...
Johnson Ltd. determined that the net present value of an investment in technological
improvements at its plant in France would be €12,000,000 if pending litigation was resolved in
the company's favor and would be €3,000,000 if the courts ruled against the company. Johnson's
attorneys in France assessed the probability of a favorable ruling at 85%.
Required: What is the expected net present value of the project? Show your work
Homework Answers
Solution:
Expected net present value = NPV if litigation resolved * Probability in company favor + NPV if litigation against company * Probability against company favor
= (12,000,000*85%) + (3,000,000*15%)
= 10,650,000 Euro
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Johnson Ltd. determined that the net present value of an
investment in technological
improvements at...
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