(0.6) Introduce New Product -$1,000,000 at ΕΟΥ $200,000 profit per year for six years, starting at EOY 3 (0.4) $280,000 profit per year for six years, starting at ΕΟΥ 3 Year 0 $0 profit/yr. for 8 years Figure 10 3 Decision Tree Diagram Do Nothing

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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1. If the interest rate is 8% per year, what decision would you make based on the
decision tree diagram in Figure below.
(0.6)
Introduce
New Product
$200,000 profit per year
for six years, starting at
ΕΟΥ 3
-$1,000,000 at
ΕΟ 2
(0.4)
$280,000 profit per year
for six years, starting at
ΕΟΥ 3
Year 0
$0 profit/yr. for 8 years
Figure 10.3. Decision Tree Diagram
Do Nothing
Transcribed Image Text:1. If the interest rate is 8% per year, what decision would you make based on the decision tree diagram in Figure below. (0.6) Introduce New Product $200,000 profit per year for six years, starting at ΕΟΥ 3 -$1,000,000 at ΕΟ 2 (0.4) $280,000 profit per year for six years, starting at ΕΟΥ 3 Year 0 $0 profit/yr. for 8 years Figure 10.3. Decision Tree Diagram Do Nothing
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