Utilization rates for MRI scans, the analyst made the following NPV estimate:
Is it a good investment to you? b. Assuming that the probability of the medium-demand state remains 54 percent, calculate the maximum probability you can assign to the low-demand state and still have an expected NPV of 0 or higher. (Hint: The sum of the probabilities assigned to all three states must be 100 percent. The expected NPV for the MRI machine is $0. Round to the nearest dollar.)
Data Table
Demand State Low Medium High
Probability of State 11% 54% 35%
NPV Estimate $(297,000) $197,000 $410,000