Decission Tree for capital Investment decision
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Create a decision tree using the method described in the textbook or any method for a capital investment project to compare acquisition of a competitor with five-year present value high/low cash flow of $500/$400 million (probability 80%/20%) at an acquisition cost of $300 million, versus entry into the competitors field with a five-year present value high/low cash flow of $200/$100 million (probability 60%/40%) and a market entry cost of $30 million.
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Solution Summary
The solution draws the decision tree for a capital investment project by using given information. It also explains the steps in choosing the best alternative.
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Please refer attached file for image of decission tree.
Solution:
NPV of Project if he goes for acquisition of a competitor = Expected PV of inflow - Cost
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Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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