Exhibit 14.4 The Z−90 Project Being Considered by Steppingstone Inc. (SI) Has

Exhibit 14.4
The Z−90 project being considered by Steppingstone Inc. (SI) has an up-front cost of $250,000. The project's subsequent cash flows are critically dependent on whether another of its products, Z−45, becomes an industry standard. There is a 50% chance that the Z−45 will become the industry standard, in which case the Z−90's expected cash flows will be $110,000 at the end of each of the next 5 years. There is a 50% chance that the Z−45 will not become the industry standard, in which case the Z−90's expected cash flows will be $25,000 at the end of each of the next 5 years. Assume that the cost of capital is 12%.

-Refer to Exhibit 14.4.Based on the above information,what is the Z−90's expected net present value?

A) −$6,678
B) −$3,251
C) $15,303
D) $20,004
E) $45,965

Correct Answer:

Verified

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