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QUESTION
Dell has $100 income this year and zero income next year. The expected return from investing in the stock market is 10 percent a year.
Mr. Dell has $100 income this year and zero income next year. The expected return from investing in the stock market is 10 percent a year. Mr. Dell also has an investment opportunity—having the same risk as the market in which he can invest $50 this year and receive $80 next year. Suppose Mr. Dell consumes $50 this year and invests in the project. What is the NPV of the investment opportunity?
