Assignment-3 solutions - Assignment 3 Answers Chapter 4 5....

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Assignment 3 Answers Chapter 4 5. $ 12 Million $14 Million $10 Million $10 Million High High Low Low .40 .40 .60 .60 Small Facility Large Facility $6 Million $9 Million $0 Do nothing For the small facility, NPV = .40 ($12 Million) + .60 ($10 Million) - $6 Million = $4.8 Million Do nothing, NPV = $0 For the large facility NPV = .40($14 Million) + .60($10 Million) - $9 Million = $2.6 Million Therefore, build the small facility.
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6. $4 Million $3,000 x 1500 =$4.5 Million $2,000 x 1500 = $3 Million $5 Million $4,000  x 600 = $2.4 Million .70 .30 .60 Shopping Center Apartments Houses .60 .40 .40 Rezoned Not Rezoned 2 1 3 $3 Million $2 Million Rezoned shopping center: Point 1: Expected value = .70($4 Million) + .30($5 Million) = $4.3 Million Rezoned apartments: Point 2: Expected value = .60($4.5 Million) + .40($3 Million) = $3.9 Million Since a shopping center has more value, prune the apartment choice. In other words, if rezoned, build a shopping center with a profit of $4.3
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This note was uploaded on 11/20/2011 for the course ACCOUNTING 2331 taught by Professor Milbrath during the Spring '11 term at University of Houston.

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Assignment-3 solutions - Assignment 3 Answers Chapter 4 5....

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