# "A corporation is trying to decide whether to buy the patent for a product designed by another company. The decision to buy will mean an investment of \$9.6 million, and the demand for the product is not known. If demand is light, the company expects a return of \$2 million each year for the first three years and no return in the fourth year. If demand is moderate, the return will be \$2.73 million each year for four years, and high demand means a return of \$5.4 million each year for four years. It is estimated the probability of a high demand is 0.47, and the probability of a light demand is 0.21. The firm's interest rate is 15.7%.Calculate the expected present worth of the patent. Express your answer in millions of dollars. For example, if the answer is \$12.3 million, enter 12.3. (All figures represent after-tax values.)"

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"A corporation is trying to decide whether to buy the patent for a product designed by another company. The decision to buy will mean an investment of \$9.6 million, and the demand for the product is not known. If demand is light, the company expects a return of \$2 million each year for the first three years and no return in the fourth year. If demand is moderate, the return will be \$2.73 million each year for four years, and high demand means a return of \$5.4 million each year for four years. It is estimated the probability of a high demand is 0.47, and the probability of a light demand is 0.21. The firm's interest rate is 15.7%.
Calculate the expected present worth of the patent. Express your answer in millions of dollars. For example, if the answer is \$12.3 million, enter 12.3. (All figures represent after-tax values.)"

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Step 1

Given: Interest rate = 15.7%

Probability of high demand = 0.47

Probability of light demand = 0.21

Step 2

Present worth when there is light demand.

Step 3

Present worth when there i...

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