Question 22
A pharmaceutical company start a new project to discover a drug. The project costs 500 thousand units, which is financed with a 400 thousand-unit loan and the remaining amount in equity. There is a 70% chance of a successful discovery, and in this case, the project generates a payoff of 900 thousand units in the next year. In the event of failure (30% chance), only 100 thousand units are recovered. The appropriate cost of capital is 10% per year.
Based on the above data, answer the given subquestions.
What is the expected payoff for the equity owner in the next year?
110.33 thousand
147.67 thousand
180.19 thousand
220.00 thousand