Answer:
Net present value 27.792‬
Explanation:
Sales 2.100 units x 20 net cash flow = $ 42,000 cash flow per year
Present value of the first three years:
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 42,000
time 3 years
discount rate: 0.12
[tex]42000 \times \frac{1-(1+0.12)^{-3} }{0.12} = PV\\[/tex]
PV $100,876.9133
For year 4 and 5 we need to check for the expected cashflow
We will multiply each outcome by their probability:
1,400 units x $20 per unit x 0.5 chance = Â 14,000
2,500 units x $20 per unit x 0.5 chance = 25,000
expected return: Â Â 39,000
present value of these years:
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex] Â
Maturity  $39,000.0000
time  4 end of year 4th
rate  0.12
[tex]\frac{39000}{(1 + 0.12)^{4} } = PV[/tex] Â
PV Â 24,785.21
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex] Â
Maturity  $39,000.0000
time  5 end of year 5th
rate  0.12
[tex]\frac{39000}{(1 + 0.12)^{5} } = PV[/tex] Â
PV Â 22,129.65
Net present value will be the present value of the cash flow less the investment.
100,877 + 24,785 + 22,130 - 120,000 = 27.792‬