If the client is bidding on a contract and 100% likely to win, the NPV is (operating profit of 9M/discount rate of 10% - upfront cost of 50M) = 40M..in the next question they ask what is your NPV if you now have a 50% chance of winning. They calculate this as 50% of 9M/discount rate of 10%, which is 45M..why are they applying the probability to the first half of the equation? Can someone explain this?
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