is considering an investment project that generates a cash flow of $33,000 next year if the economy is favorable but generates only $12,000 if the economy is unfavorable. The probability of favorable economy is 60% and of unfavorable economy is 40%. The project will last only one year and be closed after that. The cost of investment is $25,000 and the company plans to finance the project with $8,000 of equity and $17,000 of debt. Assuming the discount rates of both equity and debt are 0%. What is the expected cash flow to the company's shareholders if the company invests in the project

Net cash flow to shareholders = -400

Explanation:

The probability of favorable economy is 60%

The probability unfavorable economy is 40%.

The cost of investment is $25,000

finance the project with $8,000 of equity $17,000 of debt.

Solution:

Net cash flow to shareholders = expected cash flow generated - cost of investment

Expected cash flow generated next year = 33000 * 0.6 + 12000 * 0.4

Expected cash flow generated next year = 19800 + 4800

Expected cash flow generated next year = 24600

Given cost of investment = 25000

Net cash flow to shareholders = (expected cash flow generated - cost of investment)

Net cash flow to shareholders = 24600 - 25000

Net cash flow to shareholders = -400

i would say iii (3) because in order to compare a price you have to use as a reference other near stores because it's its

hope i explained myself

answer; sensory adaptation;