Consider the information given below to answer the question that follows. MFM...
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Consider the information given below to answer the question that follows.
MFM Manufacturers is considering making an investment in a business improvement project with the following probability and expected rate of return:
The probability and expected rate of return of the MFM Manufacturers' business improvement project
State of the economy
|
Probability
|
Project return
|
Extraordinary boom
|
35%
|
40%
|
Boom
|
25%
|
30%
|
Normal
|
20%
|
20%
|
Recession
|
15%
|
-10%
|
Depression
|
5%
|
-15%
|
|
100%
|
|
The expected rate of return on this project is
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