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Question
Use the following information to answer the following question(s).Tropical Soft Drinks is evaluating a proposal to install solar panels on the roof of it's factory near San Juan. The panels will cost $150,000 per set. Depending on the price of electricity and the efficiency of the panels, the project will increase operating cash flows by either $50,000 per year or $75,000 per year. The useful life of the panels is 5 years. If early results indicate savings of $75,000 per year, four additional sets of panels will be installed immediately at the same cost with the same projected savings. The probability of either outcome is 50%. Use a discount rate of 10%.
What is the expected NPV of the project if the option to expand is not considered.
A) $39,539
B) $86,924
C) $236,924
D) $134,309
Answer
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Related questions
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